While investors have had a close eye on equities all year, fixed income has had strong overall performance. For example, the Bloomberg US Aggregate Bond Index (BBUSATR) has returned 2.6% over one year. Of course, with the return on fixed income performance, some segments will stand out more than others. High yield could be the place to look as we enter 2025, per insights from T. Rowe Price, with the active high yield ETF THYF offering a compelling option for income.
See more: Holding Cash? Consider Active Fixed Income Investing Instead
According to a new piece, “Finding income in high yield bonds, bank loans, and emerging markets,” by T. Rowe Price Head of International Fixed Income Ken Orchard, both bank loans and high yield bonds offer opportunities for income in the new year.
“High yield bonds should also produce attractive income, but thorough credit analysis and selection is even more critical,” wrote Orchard. “If short‑term interest rates decrease, creating steeper yield curves, non‑investment‑grade bonds could actually generate more income than floating rate loans.”
The T. Rowe Price U.S. High Yield ETF (THYF ) actively invests in U.S. high-yield corporate bonds across a range of maturities. This strategy relies on T. Rowe Price’s fundamental research capabilities, which could help the active high yield ETF set itself apart from passive funds. Passive fixed income funds can’t adapt as quickly to events or scrutinize fixed-income credit quality. How to manage maturing bonds within a portfolio poses a challenge that active investing can handle better than passive funds through ongoing research and analysis.
THYF charges 32 basis points and holds primarily U.S. dollar-denominated securities, with allocation to non-U.S. dollar securities capped at 20%. The strategy can also include investing in bank loans and preferred stocks. The active high yield ETF has returned 8% over the last year period, beating BBUSATR in that time, per T. Rowe Price data. THYF offered a 5% 30-day SEC standardized yield as of November 30.
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