Now that the Fed’s interest rate cutting cycle has finally begun, investors should take a moment to reassess their fixed income portfolios.
Given that bond yields still remain highly competitive, investors have a good opportunity to take advantage of stronger bond exposure before yields drop. However, fluctuations in long-term interest rates may give investors trepidation about bolstering bond exposure amid a shifting market.
Moments like these are where high yield bond ETFs can really shine. Generally speaking, high yield bonds can be less overall sensitive to interest rates than many of their fixed income peers. By fortifying their fixed income portfolios with high yield bonds, investors can diversify their means of yield while fostering interest rate resilience.
The Eaton Vance Method
For those looking for their next high yield bond ETF, the Eaton Vance High Yield ETF (EVHY ) can make a great deal of sense. Both the fund’s investment strategy and active management make a good case for why now is a good time to invest.
While high yield bond ETFs have generally done well this year, the funds innately come with the risk of assets facing default. However, EVHY seeks to mitigate these risks by holding high yield bond securities of a higher credit quality.
As of Aug. 31, 2024, more than half of EVHY’s portfolio had a credit quality of BB or higher. This allows the fund to access stronger income while mitigating some of the default risk present with rated options rated CCC.
The fund’s strategy is buoyed with the versatile benefits of active management. Along with mitigating risk of default, EVHY’s portfolio team can position the fund to best benefit investors, regardless of where the rate cycle takes the market.
Right now, EVHY is providing investors with a competitive and consistent yield profile. As of Sept. 18, 2024, the fund has a 30-day SEC yield of 5.6%.
For more news, information, and analysis, visit The ETF Yield Channel.
