Prior to the new year, many experts and advisors were expecting interest rate cuts from the Federal Reserve to peter out in 2025.
The Federal Reserve is continuing to signal that interest rates will remain unchanged. However, a growing number of investors are doubting whether that will actually be the case.
The CME FedWatch Tool shows the market pricing in two to three cuts this year. As for when the cuts will occur, some traders expect the Fed to start trimming rates again as soon as June.
Pressure for the Fed to adjust interest rates isn’t just coming from the investment community, either. In April, President Trump called on the Federal Reserve to take immediate action to lower interest rates.
Lower interest rates could create a more favorable environment for core plus bonds. Core bonds include U.S. Treasuries, agency securities, investment-grade corporate bonds, and mortgage-backed securities. The Plus part of the sleeve often includes opportunistic investments in high yield and emerging market debt.
Now is the time for advisors to make sure their fixed income strategies are positioned to capitalize on potential Fed moves.
Looking Beyond Core Exposure
One core-plus fund investors could turn to is the BNY Core Plus Fund. With a focus on quality, DCPAX looks to build a stable bond ballast by investing in a mix of fixed income sectors. This includes investment grade corporates, mortgage-backed securities, and U.S. Treasuries, among others.
As a core-plus fund, DCPAX looks to lock in yield from sources outside a usual core bond fund. This is done in part by allocating a small number of assets to compelling high yield and emerging market securities.
By broadening itself across different fixed income sectors, DCPAX is able to tap into compelling returns across the bond spectrum. Additionally, this diversification leaves DCPAX less vulnerable if an individual bond sector experiences volatility.
Even before rate cuts come back into play, DCPAX still offers a good track record of income. As of May 5, 2025, the fund has a subsidized 30-day SEC yield of 4.39%.
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