Despite the elevated volatility as a result of slowing economic growth and uncertainty over the Federal Reserve rate hike, investors may still find value in some fixed-income assets and related exchange traded funds.

For instance, Russ Koesterich, global chief investment strategist and head of the model portfolio & solutions business at BlackRock, still favors a portfolio tilted toward select credit, tax-exempt bonds and inflation protection through Treasury Inflation Protected Securities.

“We also maintain a preference for credit within fixed income,” Koesterich said. “Despite the equity market volatility, high yield has stabilized over the past week and yields remain attractive.”

For instance, the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG) has a 6.75% 30-day SEC yield and the SPDR Barclays High Yield Bond ETF (NYSEArca: JNK) has a 6.57% 30-day SEC yield. HYG has an effective duration of 4.13 years and JNK has a 4.3 year duration.

In contrast, 5-year Treasury bond yields are hovering around 1.55% and the benchmark 10-year yield is at about 2.23%.

Koesterich also mentioned that investment-grade corporate debt also looks cheap, but the strategist advises investors to hold off until later this fall due to the pending supply.

Investment-grade-rated debt issuers have halted sales in August as a response to the sudden spike in volatility and uncertainty over a potential September Federal Reserve rate hike, reports Cynthia Lin for the Wall Street Journal.

“To think August was supposed to have been a massive month, [the lull]suggests there’s an issuance wall waiting in the wings,” CRT Capital bond strategist David Ader told the WSJ.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.