With the Federal Reserve due to meet in less than a week, investors are confident that we will see the first interest rate cut of the year very soon. One efficient means to capitalize on the upcoming rate cycle is to use short duration bonds and bond ETFs. Recent insights from Eaton Vance why now is a great time to bolster bond exposure.
Currently, the CME FedWatch Tool is pricing in overwhelming odds that the Fed begins its long-awaited rate cutting cycle. Given that the Fed meeting is fast approaching, investors would do well to tune their portfolios to capitalize on this expected outcome.
“We believe bond yields are priced to perfection. Bonds are priced for the Fed to cut interest rates by over 200 basis points (bps) by the end of 2025,” Eaton Vance noted. “While there may be some room for yields to move lower, we think it will take a hard landing or a deeper recession to see a material drop. We still believe that we are in a structurally higher inflation regime for years to come.”
Established Bonds Experience
The Eaton Vance Short Duration Income ETF (EVSD ) can offer investors an effective short duration bond strategy. The fund seeks to provide high levels of income for its investors through a curated portfolio of investment-grade fixed income securities.
Eaton Vance’s active portfolio team uses a disciplined investment approach to cultivate fixed income securities from a variety of sectors. This includes corporate bonds, U.S. government securities, and both mortgage- and asset-backed securities, among others.
Right now, a short duration bond strategy can make a great deal of sense. Short duration bonds can leverage bond yields while facing less risk from long-term shifts in interest rates. Additionally, bonds with a shorter duration can be much easier to hold until maturity.
Even before rate cuts begin, EVSD is offering competitive yield to investors. As of September 10, 2024, the fund has a 30-day SEC yield of 4.61%.
For more news, information, and analysis, visit The ETF Yield Channel.
