Not All Fixed Income Outperformance Was Equal

Despite expectations for a recession in the second half of the year, markets were remarkably resilient in 2023. Inflation levels eased through most of the year, which enabled the Fed to pause its interest rate hikes. And performance for most fixed income market segments was positive, a reversal from broad financial sector losses in 2022.

But not all outperformance was equal. As BondBloxx recently noted, returns varied widely across the yield curve and within fixed income sectors in 2023. In particular, CCC corporates reigned supreme, returning 20.1% in 2023, above high-yield consumer cyclicals (16.3%) and high-yield telecom, media, and technology (11.9%).

See more: “Why Now’s a Good Time to Invest in Fixed Income

The disparity in returns shows that when investing in fixed income, particularly within high yield, precision matters. That’s why BondBloxx offers an array of fixed income ETFs that offer investors multiple entry points, either by rating or sector.

Multiple Entry Points in High Yield

For example, the BondBloxx CCC-Rated USD High Yield Corporate Bond ETF (XCCC) is one of three ratings-specific high-yield bond ETFs that BondBloxx offers. Or, if your client prefers to target high yield by sector, the investment firm has a suite of seven sector-specific high-yield bond funds. Among them include the BondBloxx US High Yield Consumer Cyclicals Sector ETF (XHYC) and the BondBloxx US High Yield Telecom Media & Technology Sector ETF (XHYT).

“Within fixed income, we believe investors will need to look beyond broad-based benchmarks to establish more precise exposures as a way to seek outperformance,” BondBloxx wrote.

BondBloxx is a rapidly growing fixed income manager with more than $2.5 billion in assets across 20 ETFs. VettaFi’s Head of Research Todd Rosenbluth called BondBloxx “one of the more innovative providers of fixed income ETFs.”

For more news, information, and analysis, visit the Institutional Income Strategies Channel.