HomeFinance NewsFinanceBond Bubble Over? Fed Rate Cuts Could Burst It!

Bond Bubble Over? Fed Rate Cuts Could Burst It!


‘Biggest mistake’ bond investors may make ahead of Fed rate cuts


Investors, despite the Federal Reserve’s plans for interest rate cuts, may want to consider maintaining or even increasing their fixed income holdings.

Exchange-traded funds (ETFs) focused on intermediate-term bonds offer opportunities to manage interest rate fluctuations.

Intermediate-term bonds provide a balance between risk and reward.

When interest rates decline, these bonds benefit from a potential increase in their total return.

Tony Rochte, of Morgan Stanley Investment Management, recommends the Eaton Vance Total Return Bond ETF (EVTR), with a 6-year duration and a yield of around 6.6%.

For income generation, Rochte suggests municipal bond funds, such as the Eaton Vance Short Duration Municipal Income ETF (EVSM).

This fund offers a yield of 3.5%, which is equivalent to almost 6% in taxable terms.

Instead of rushing back to equities, investors can explore these fixed income opportunities to navigate the current interest rate environment.

These ETFs provide diversification and the potential for stable returns, making them a valuable addition to investment portfolios.

  • Overall sentiment: neutral
  • Positive

    “Your biggest mistake could be rushing back into equities before you’re considering all these opportunities in fixed income.”

    “If you go into the intermediate space, whether it’s in credit or within Treasurys, you’re taking on some risk and you’re going to benefit from a total return tail wind when rates go down.”


    “Though off its peak of more than 5% in late 2023, the benchmark 10-year U.S. Treasury note yield has reaccelerated over the past month.”

    “To manage interest rate volatility effectively, Gallegos suggests investors look to exchange-traded funds focused on intermediate term bonds.”

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