Bond Sell-Off Should Wind Down During the Summer, Analyst Says

Bond investors may be seeing less red with summer around the corner if Rick Rieder, chief investment officer of global fixed income at BlackRock, is correct. Rieder sees the recent sell-offs subsiding as summer wears on and the U.S. Federal Reserve unwinds its $9 trillion balance sheet.

At the height of the pandemic, the Fed picked up a number of bond holdings, including exchange traded funds (ETFs) to prop up the debt market and avoid credit defaults. Lately, bonds have been following stocks downward in 2022 as inflation fears hit both assets.

“I do think we’ll see better markets starting sometime in around the summer. … A lot will happen between now and then,” Rieder told Reuters in an interview.

Rieder did add that the bullish run in the bond market is coming to an end after an extended rally that spans across decades.

“We’ve seen the end of the bond bull market: There’s a structurally higher inflation because of deglobalization, supply chain evolutions, stickier infrastructure costs,” Rieder added.

As investors regain confidence in the bond markets, they can look to opportunities in low-cost ETFs from Vanguard.

2 Options for Broad Bond Exposure

To get aggregate exposure to the bond markets, investors can consider the Vanguard Total Bond Market Index Fund ETF Shares (BND). BND, which comes with a low 0.03% expense ratio, presents bond investors with an all-encompassing, aggregate solution to getting U.S. bond exposure. It can be an ideal solution for investors seeking to complement their equities exposure.

For corporate bond exposure, in order to get more yield (albeit with more credit risk), investors can opt for the Vanguard Total Corporate Bond ETF ETF Shares (VTC). The fund seeks to track the performance of a broad, market-weighted corporate bond index.

The fund is a fund of funds, and it employs an indexing investment approach designed to track the performance of the Bloomberg U.S. Corporate Bond Index, which measures the investment-grade, fixed-rate, taxable corporate bond market. The fund also comes with a low expense ratio of 0.04%.

For more news, information, and strategy, visit the Fixed Income Channel.