BlackRock’s Rick Rieder sees an “historic” and attractive opportunity in high-quality bonds, advocating for investment-grade corporate credit, particularly hyperscaler bonds, due to their strong fundamentals and appealing yields amidst current market volatility. While anticipating a December Fed rate hike, he expresses disagreement with its necessity, highlighting risks like rising government debt and the “crowding-out” effect from abundant AI-related bond supply.
While some investors are understandably cautious about the recent volatility in the bond market, Rick Rieder, BlackRock's Chief Investment Officer for Global Fixed Income, sees a truly "historic" opportunity in high-quality credit. In an exclusive interview with CNBC, Rieder highlighted the potential for investors to achieve attractive yields.
Rick Rieder speaking at the CNBC CEO Council Summit in Washington, D.C.
Credit: Aaron Clamage | CNBC
Rieder proposes that it's now feasible to construct a diversified portfolio yielding over 7% with less than three years of duration and an average credit quality of A-. He explains that such yields typically appear only during economic downturns or default crises, which isn't the case today with a strong economy and low default risk.
He noted the contrast with instruments like the iShares Aaa - A Rated Corporate Bond ETF (QLTA), which has a 30-day SEC yield of 5.68% but a longer effective duration of 6.48 years. Rieder's own managed fund, the iShares Flexible Income Active ETF (BINC), offers a comparable 5.66% 30-day SEC yield with a three-year effective duration, though its portfolio includes more than just investment-grade credit.
iShares Flexible Income Active ETF year to date
Best Opportunities: Hyperscaler Bonds
For the first time in a "really long time," Rieder is particularly bullish on investment-grade corporate bonds. This includes a strong focus on hyperscaler bonds from tech giants like Alphabet, Amazon, Meta Platforms, and Oracle, which have collectively issued approximately $228.4 billion in bonds year-to-date (as of Oct. 20) to fund their AI infrastructure build-out.
He praises these companies for their "very low leverage" and "tremendous amounts of cash flow," making their bonds attractive for investors seeking higher-quality assets with appealing yields. BlackRock's iShares Flexible Income Active ETF (BINC) has increased its allocation to investment-grade corporates to 14.3% from 8.5% in July.
Despite the current appeal, Rieder advises patience, acknowledging that rates could still climb further. He emphasizes that the starting yield is the most crucial predictor of future returns, assuring that investors with a holding period of a year or longer are likely to realize their expected yield.
However, Rieder cautions against venturing outside investment-grade credit without thorough due diligence, especially in certain AI-related areas. He notes wariness around parts of the data center supply chain not directly backed by hyperscalers, given the recent turbulence in the high-yield credit market, exemplified by companies like CoreWeave.
CoreWeave's 2031 bond yield on Oct. 21, 2026
Monitoring the Federal Reserve
Rieder also keeps a close watch on the Federal Reserve. While he anticipates another rate hike in December (a nearly 90% market probability), he disagrees with the necessity, arguing that higher rates disproportionately impact certain sectors like housing and auto loans, while having less effect on tech companies' capital expenditures, which often drive growth without relying on overnight funds rates.
Assessing Future Risks
Looking ahead, Rieder identifies rising global government debt, particularly the U.S. budget deficit, as a significant risk. He warns that increasing central bank rates elevate the cost of debt for already heavily indebted governments.
Furthermore, the sheer volume of bond supply from AI companies, especially data center and hyperscaler-related issuance, could lead to a "crowding-out effect," requiring careful monitoring alongside rising government rates. For now, Rieder recommends enjoying the attractive yields of high-quality investment-grade bonds.
