Bonds can be more than just a safe haven.
BondBloxx ETFs' Tony Kelly, former global head of ETFs at Goldman Sachs Asset Management, says investors may take offense here too, given the market environment.
“It's definitely becoming more nuanced,” the company's co-founder told CNBC's “ETF Edge” this week. “Advisers are a bit more thoughtful as there are more opportunities in fixed income now that interest rates are no longer close to zero [percent].”
The Federal Reserve cut interest rates by a quarter point on Wednesday, its second move this year. The decision reduced the key interest rate to between 3.75% and 4%, a level that is still well above zero.
Now the benchmark 10-year Treasury note yield rose again to over 4% after the latest decision. The yield fell nearly 2% last month and is down about 11% so far this year.
Kelly, whose firm specializes in exchange-traded bond funds, believes bonds are becoming an active source of diversification, income and tactical opportunities.
Kelly highlights emerging market bonds as a standout performer.
“[It’s] “It is one of the highest-yielding asset classes in the bond market this year,” he noted.
Kelly notes that interest is also growing in private credit ETFs, which allow investors to unlock institutional returns with daily liquidity.
“I don't know if you would necessarily call this 'plain vanilla,' but there is a lot of interest in this subset of the fixed income asset class being offered to clients in an ETF shell,” Kelly said. “We currently have a private credit ETF product on the market. We have one in the registry.”