Bonds may be better positioned in 2025 than investors realize.
There are a few reasons why the outlook for bonds in 2025 is more optimistic now than it was a year ago, Neuberger Berman’s Global Head of Fixed Income, Ashok Bhatia, said in the Disrupting Forces in Investing podcast.
First, the bond market has only priced in for the Fed to ease interest rates one and a half times this year. “The hurdle rate’s pretty low. You don’t need the Fed to do an awful lot for bond yields to be, in our view, supported around these levels,” Bhatia said.
The second relates to deficit concerns. With where long-term yields sit, the bond market may be equally exposed to bad news on the deficit as it is to good news, according to Bhatia. This means that a budget deal in March could potentially be a positive event for bonds.
Finally, there’s positive income available from moving out of cash, according to Bhatia. The yield on bank accounts and money market accounts is going to be around 4%, down from above 5%, where it was a year ago. With the current policy rate, there is a compelling opportunity for investors to consider moving into government bonds.
For Investors Moving From Cash to Bonds in 2025
The Neuberger Berman Short Duration Income ETF (NBSD ) may be a solution for investors looking to move out of cash or ultra-short fixed income products in search of more yield.
NBSD seeks to offer investors access to high current income consistent with liquidity, while mitigating principal risk. The short-duration income ETF invests in fixed and floating-rate investment-grade bonds, along with other debt instruments.
To limit credit risk, the fund invests in a wide variety of issuers and securities. This may include U.S. Treasury securities, derivative instruments, or different ETFs, among other options.
See more: 2 ETFs to Consider in a Rate-Cutting Environment
For more news, information, and analysis, visit the Invest Beyond Cash Channel.
