Are bonds really and truly back? As markets hit the mid-year point, it’s time to revisit some of the themes and trends investors are watching. One such storyline surrounds the return of fixed income. While the income may really be back into the 40 side of the 60/40, not all bonds offer the same returns. That’s why it pays to rely on active bond investing when looking to deepen or lean into fixed income overall in ETFs.
A return to bonds overall may be too optimistic right now according to recent insight from T. Rowe Price. The firm’s midyear outlook suggests instead that being more discerning offers a better way into the space. For example, sovereign bonds and investment-grade credit still have yet to offer real, positive after-inflation yields. Negative yield curves are adding to the challenges in fixed income, too, making it expensive to add duration for investors, too.
See more: “Is 2023 the Year of the Active ETF Advisor?“
A small dose of duration can work, but a broader focus in areas like corporate credit may work better, instead. The global high-yield market offers yields in the 8-10% range, the latest research emphasizes. Those and other opportunities stand out as the types that active bond investing can find when other fixed income strategies get distracted.
By using a bottom-up approach to considering each security, rather than tracking an overall index, active bond investing can be a reliable addition to an overall portfolio. Active managers familiar with a given market segment can tell which firms are looking up with strong balance sheets, and which are merely “zombies.”
Active Bond Investing ETF Option
Altogether, active bond investing ETFs present a great way to navigate a positive swing for fixed income overall. The firm offers a variety of active bond ETFs, including the T. Rowe Price Ultra Short-Term Bond ETF (TBUX) and the T. Rowe Price QM U.S. Bond ETF (TAGG).
For more news, information, and analysis, visit the Active ETF Channel.
