JPMorgan Asset Management is presenting a compelling case for high-quality fixed income, dubbing it a ‘once-in-a-generation opportunity’ due to attractive yields and diversification benefits. Portfolio manager Priya Misra highlights that investors can now access significant returns without sacrificing credit quality, offering a potential hedge against concentrated tech exposures like AI stocks.
Supporting this view, Joanna Gallegos of BondBloxx also advocates for incorporating corporate debt, citing stable base rates and robust corporate fundamentals as reasons to re-evaluate fixed income’s income-generating potential and its role in portfolio stability.
In a bold assessment that challenges prevailing market sentiment, JPMorgan Asset Management has issued a bullish call on the high-quality fixed income sector, identifying it as a potential 'once-in-a-generation opportunity' for investors.
Priya Misra, a portfolio manager at the firm, articulated this optimistic outlook, highlighting the attractive yields available even within the safest segments of the bond market. "You can actually take credit risk in the highest quality companies and still get [a] 6.5% [yield]," Misra stated during an appearance on CNBC's "ETF Edge." She emphasized that this allows investors to avoid compromising on credit quality to achieve significant returns.
Misra suggested this strategy could appeal to investors wary of over-concentration in artificial intelligence stocks. "There's a huge AI exposure," she noted. "What fixed income gives you is this diversified set of returns. It's not just an AI trade or a tech trade. You have the Treasury trade. You have credit outside of AI."
She co-manages the JPMorgan Core Plus Bond Fund ETF (JCPB), a fund with nearly $16 billion in assets under management. As of August 31, over three-quarters of its holdings were in BBB-rated debt and above.
"We've actually been increasing some of the double-B [and] single-B exposure because there has been a widening in high yield spread," Misra revealed. "We like some investment grade. And now, we've started in the last few days to increase some duration as well, thinking we may be nearing the end of that rate move."
The JPMorgan Core Plus Bond Fund ETF has seen a decline of over 5% year-to-date as of Friday's close, according to FactSet. Misra stressed the importance of a granular approach, advising investors to examine individual bonds and sectors, alongside bottom-up analysis to ensure companies are not overleveraged. She also expressed concern about the potential impact of higher interest rates on the housing market.
Echoing this sentiment, Joanna Gallegos, co-founder of BondBloxx, also encouraged investors to capitalize on "historically attractive" yields across debt markets. "You want to really consider getting some corporate debt into your portfolio," Gallegos said. "It's really in the investor's best interest to start looking at the income that's back in fixed income. It can offset the volatility in your portfolio."
Gallegos pointed to stable and high base rates, coupled with strong corporate fundamentals and continued economic growth, as key drivers supporting her bullish stance on fixed income, suggesting this narrative is often overshadowed by discussions of Treasury rates.
BondBloxx, known for its fixed-income ETFs across various sectors, offers products including the BondBloxx Private Credit CLO ETF (PCMM). As of Friday's close, PCMM was down 0.6% year-to-date, according to FactSet.
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