J.P. Morgan Asset Management has issued a strongly bullish outlook on high-quality fixed income, describing the current market conditions as a rare, once-in-a-generation chance for investors. Priya Misra, a portfolio manager at the firm, told CNBC’s “ETF Edge” that investors can secure yields of approximately 6.5% by taking credit risk in top-tier companies without needing to downgrade their credit quality.
Misra highlighted that this strategy offers a valuable hedge for portfolios heavily concentrated in artificial intelligence stocks. She noted that fixed income provides a diversified return stream that extends beyond tech and AI trades, incorporating Treasury positions and credit exposure outside the AI sector.
Misra co-manages the JPMorgan Core Plus Bond Fund ETF (JCPB), which held nearly $16 billion in assets under management as of Aug. 31. More than three-quarters of the fund’s holdings are in BBB-rated debt or higher. She revealed that the team has recently increased exposure to double-B and single-B rated debt due to widening high-yield spreads, while also adding duration in recent days as they anticipate the current rate cycle may be nearing its end. Despite these strategic shifts, the ETF has declined more than 5% year-to-date through Friday’s close, according to FactSet data.
Emphasizing a bottom-up approach, Misra stressed the importance of analyzing individual bonds and sectors to ensure companies are not over-leveraged. She expressed concern that elevated interest rates could negatively impact the housing market, referencing recent reports that mortgage rates have reached nearly three-year highs while demand continues to contract.
Joanna Gallegos, co-founder of BondBloxx, echoed the positive sentiment, urging investors to capitalize on historically attractive yields across debt markets. She recommended adding corporate debt to portfolios to offset volatility, pointing to strong corporate fundamentals and continued economic growth as key drivers. Gallegos argued that these positive factors are being overshadowed by narratives focused on Treasury rates.
BondBloxx is known for its fixed-income ETFs covering Treasuries, corporate debt, private credit, and emerging markets. One of its funds, the BondBloxx Private Credit CLO ETF (PCMM), was down 0.6% for the year as of Friday’s close, according to FactSet.
Skeptical about the ‘once in a generation’ hype. We’ve heard this before in 2011 and 2018. Let’s see how this plays out over five years.
The AI hedge angle is interesting, but aren’t all these fixed income funds still indirectly exposed to the same tech giants?
Six point five percent on top-tier bonds sounds amazing. My current savings account is essentially insulting me with zero returns.
I hope this ‘opportunity’ doesn’t turn into a trap if rates stay higher for longer. The housing market warning is concerning.