The Ending(?) Rate Hike Cycle Is Good News for Bond Funds

If the Federal Reserve isn’t done raising interest rates, many advisors believe they’re at least close to being done. And according to Brian Donnelly, fixed income strategist at Fidelity Investments, that’s good news for bond funds.

See more: “Consider High Yield Bond ETF FDHY

In a VettaFi conducted poll, attendees responded to questions asking what bond changes they were considering heading into year-end. And 60% of respondents said they plan to add to fixed income ETF exposure using proceeds from cash and/or equities. This poll result heartened Donnelly.

Enter the Bond Market With FBND or FLDR

During the panel, Donnelly discussed that investors consider the Fidelity Total Bond ETF (FBND). FBND is the core-plus ETF under active management for Fidelity. It is run by the same management team and uses the same approach as the Fidelity Total Bond Fund (FTBFX). However, FBND carries a lower expense ratio of 0.25%.

“Fidelity believes strongly in active management,” Donnelly said. He added that FBND “doubled the assets” in 2023 and “have very strong liquidity.” It can also move in and out of core-plus sectors like high yield and emerging markets.

Another ETF fixed income investor may want to investigate is the Fidelity Low Duration Bond Factor ETF (FLDR). FLDR tracks an index of U.S. investment-grade floating-rate notes and U.S. Treasuries maturing in seven to 10 years. The fund aims to maintain a duration of one year or less.

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