The latest remarks from the Federal Reserve are reinforcing the case for high yield bonds.
On Wednesday, Federal Reserve Chair Jerome Powell indicated that the Fed is sticking to the current plan and keeping rates steady for now. The Federal Reserve’s projections still indicate confidence in a “soft landing,” with the possibility of three rate cuts in 2024 remaining on the horizon. Notably, Powell addressed the recent higher-than-expected CPI readings, noting these signals have not drastically altered the Fed’s outlook.
With the Fed staying the course, investors can more confidently allocate assets to high yield bonds. Often referred to as junk bonds, these can bring in strong returns, while offering lower vulnerability to fluctuating interest rates.
Investors seeking to add high yield exposure to their portfolio may want to consider the Eaton Vance High Yield ETF (EVHY). The fund is actively managed and carries a net expense ratio of 0.48%.
High-Quality Investments
EVHY primarily focuses on higher-quality junk bonds. Namely, the fund allocates the majority of its exposure to BB-rated and B-rated bonds. These higher-rated bonds can deliver better results while being less at risk of default compared to other junk bonds.
Additionally, EVHY may allocate smaller investments toward alternate assets, such as investment-grade bonds or foreign market securities. When evaluating potential investments, the fund’s advisor and subadvisor do not primarily rely on preexisting ratings. Instead, they perform their own independent analysis on securities.
See more: Eaton Vance Loans Expertise to the ETF Market
Some investors may be hesitant to jump on high yield bonds due to the risk exposure. EVHY could be considered a potentially more comfortable candidate due to the fund’s position in Morgan Stanley Investment Management’s expansive ETF library. Morgan Stanley is well-known on Wall Street for delivering strong active investment strategies.
Launching in October 2023, EVHY is already delivering good results. The fund is currently up 1.26% over the last month. It has a distribution yield of 6.76% as of the end of February, and a little over $21 million in assets under management.
For more news, information, and analysis, visit The ETF Yield Channel.