The strength of the service economy has tamped down the idea that a recession is imminent in the first half of 2023. In fact, some are arguing that it’s possible that an economic slowdown won’t even occur in the second half of 2023. Combine that with the Federal Reserve most likely continuing to raise interest rates, and you have an environment in which floating rate and high yield bond funds become quite attractive.
During a recent LiveCast hosted by VettaFi (and notably before recent banking events of March 2023), Christopher Dillon, an investment specialist, said that the current environment is ideal for floating rate and high yield bonds.
“In the environment that’s played out right now where the service economy is absolutely on a tear here, and the Fed has more work to do, we like floating rate, we like high yield a little bit better with yields of 9%, 9.5%,” Dillon said.
He also noted that “as the Fed tightens monetary policy, the yield on [floating rate fixed income] improves.”
As part of its active exchange traded funds lineup, T. Rowe Price offers a suite of actively managed fixed income ETFs, including the T. Rowe Price U.S. High Yield ETF (THYF ) and the T. Rowe Price Floating Rate ETF (TFLR ).
Launched in October, THYF, which seeks to provide total return and, secondarily, current income by investing primarily in U.S. dollar-denominated high yield corporate bonds and other fixed and floating rate corporate securities. The following month, T. Rowe Price launched TFLR, which seeks high current income and, secondly, capital appreciation by investing primarily in BB- and B-rated bank loans, which the fund’s portfolio manager believes can help better manage risk and volatility than more speculative, lower-rated credit.
T. Rowe Price has been in the investing business for over 80 years, conducting field research firsthand with companies, utilizing risk management, and employing a team of experienced portfolio managers carrying an average of 22 years of experience.
For more news, information, and analysis, visit our Active ETF Channel.