How to Prepare for 2024 Fixed Income Opportunities | ETF Trends

Following a tumultuous 2022, this year has been better, though not entirely sanguine for fixed income investors. 2024 is right around the corner, and expectations of rate cuts by the Federal Reserve are rising. Now is the ideal time for advisors to evaluate opportunities in the bond market.

That will be the focal point of VanEck’s upcoming webinar, “Fortify Your Fixed Income Portfolio,” which advisors can register for here. On the webcast, Fran Rodilosso, head of VanEck ETF fixed income portfolio management, and William Sokol, director of ETF product management at the firm, will be joined by Coulter Regal, VanEck product manager, and VettaFi Head of Research Todd Rosenbluth.

They’ll discuss a variety of fixed income segments that could be attractive in 2024. These segments include collateralized loan obligations and floating rate notes. Those corners of the bond market are accessible with VanEck ETFs. Two such examples are the actively managed VanEck CLO ETF (CLOI) and the VanEck IG Floating Rate ETF (FLTR).

CLOI, FLTR Meaningful Fixed Income ETF Considerations

Rate cuts by the Fed would likely unleash a wave of elevated risk appetite in the bond market. CLOI and FLTR are among the ETFs that could be ideal for advisors looking to mitigate bond risk in 2024 while keeping clients’ income profiles high.

Take the case of CLOI. Rodilosso noted that much of the downside risk in this bond segment is priced into issues today. That indicates there could be value with CLOI, which offers a 30-day SEC yield of 6.07%. And more than 87% of its holdings are rated AAA, AA or A. Plus, the $244.8 million CLOI features a spread duration of just 2.03 years. That indicates rate risk is relatively benign with the ETF.

The  $1.29 billion FLTR follows the MVIS US Investment Grade Floating Rate Index. The fund stands out as a potentially lower risk avenue to floating rate date debt. It can also potentially deliver outperformance. Year to date, FLTR is beating the BBG US Dollar Floating Rate Note < 5 Years Index. It’s also beating the Markit iBoxx USD Liquid Investment Grade Index.

FRNs, including those residing in FLTR, have variable rate coupons that reset, which means the asset class has less sensitivity to rising rates. That’s a point to consider because it’s not a foregone conclusion that rates will fall next year.

Another point to be discussed on the webcast is the robust income profile offered by FLTR. Although it’s a near-zero duration fund, it sports a 30-day SEC yield of 6.44%, confirming it’s possible to access strong income without taking on credit or interest rate risk.

Advisors can register for the “Fortify Your Fixed Income Portfolio” webcast here.

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