Investors
with
cash
on
the
sidelines
may
want
to
start
moving
some
of
that
money
into
bonds,
according
to
a
new
report
from
BlackRock.
The
bond
market
has
seen
some
volatility
amid
the
uncertainty
around
interest
rates
and
the
Federal
Reserve’s
monetary
policy.
On
Friday,
the
10-year
Treasury
yield
briefly
tumbled
below
4.5%
after
weaker-than-expected
jobs
growth
for
April
and
a
surprise
tick
higher
in
the
unemployment
rate.
Bond
yields
move
inversely
to
prices.
“It’s
time
to
start
migrating
back
to
fixed
income,
especially
with
yields
at
these
levels,”
said
Steve
Laipply,
global
co-head
of
iShares
fixed
income
ETFs
and
co-author
of
the
BlackRock
report.
US10Y
YTD
mountain
10-year
Treasury
yields
Yields
are
at
levels
not
seen
in
20
years,
he
pointed
out.
For
instance,
the
Markit
iBoxx
USD
Liquid
Investment
Grade
Index
was
yielding
5.3%
in
March
2024,
compared
to
4.10%
in
March
2004
and
3.43%
in
March
2020,
according
to
the
report.
What
investors
shouldn’t
do
right
now
is
try
to
time
the
market,
especially
since
the
Fed
hasn’t
historically
given
“the
all-clear
signal
well
in
advance,”
Laipply
said.
“It
is
going
to
probably
be
impossible
to
call
the
peak
in
rates,”
he
added.
In
fact,
longer-term
yields,
such
as
the
5-year
Treasury
,
have
historically
moved
ahead
of
policy
shifts,
the
report
said.
“History
tells
us
that
investors
can
miss
out
on
locking
in
higher
yields
if
they
wait
for
a
clear,
definitive
answer
on
rate
cuts,”
the
BlackRock
report
said.
Federal
Reserve
interest
rate
hikes
have
been
on
hold
since
July
2023
.
After
this
week’s
Fed
meeting,
where
it
held
rates
steady
,
and
Friday’s
jobs
report,
traders
are
now
pricing
in
two
rate
cuts
by
year-end,
starting
in
September,
according
to
the
CME
Group’s
FedWatch
tool
.
Bonds
have
historically
delivered
the
strongest
performance
during
“hold”
periods,
according
to
BlackRock.
In
this
cycle,
bonds
have
had
a
slightly
positive
return
since
the
Fed
pause,
Laipply
said.
“It
has
been
bumpier
this
time,”
he
said.
He
suggests
dollar
cost
averaging,
or
adding
exposure
over
time,
to
boost
your
fixed-income
allocation.
In
fact,
many
investors
are
currently
significantly
underweight
to
fixed
income.
They
have
just
a
19%
average
allocation
to
the
asset
class,
according
to
the
BlackRock
report,
which
analyzed
Morningstar’s
data
of
U.S.
bond
and
money
market
exchange-traded
funds
and
mutual
fund
assets
as
of
Jan.
31.
“It
is
a
very
compelling
opportunity
for
investors
to
get
their
fixed-income
side
of
the
portfolio
right
sized,”
Laipply
said.
Choosing
individual
bonds
or
bond
funds
comes
down
to
an
investor’s
preference,
he
said.
Using
a
bond
fund
or
an
ETF
can
allow
an
investor
to
get
diversified
exposure
and
do
so
more
cheaply
than
buying
individual
issues.
BlackRock’s
view
is
that
investors
should
use
a
holistic
approach,
which
can
include
a
mix
of
both.
Within
funds,
they
can
be
both
passive
and
actively
managed,
Laipply
said.
Right
now,
he
thinks
intermediate
duration
might
be
a
good
place
to
start.
For
those
who
want
broad
exposure
to
U.S.
investment-grade
bonds,
BlackRock’s
passively
managed
iShares
Core
U.S.
Aggregate
Bond
ETF
(AGG)
tracks
the
Bloomberg
U.S.
Aggregate
Index.
It
has
a
30-day
SEC
yield
of
4.81%
and
expense
ratio
of
0.03%.
It
has
an
effective
duration
of
six
years.
AGG
YTD
mountain
iShares
Core
U.S.
Aggregate
Bond
ETF
year
to
date
The
iShares
Core
Total
USD
Bond
Market
ETF
(IUSB)
is
also
a
passively
managed,
broad
bond
market
fund
which
adds
exposure
to
potentially
higher-yielding
names.
It
has
a
30-day
SEC
yield
of
5.12%
and
0.06%
expense
ratio.
For
an
actively
managed
fund,
BlackRock
has
its
Flexible
Income
ETF
(BINC)
.
It
has
a
30-day
SEC
yield
of
6%
and
a
net
expense
ratio
of
0.4%
.
