According to BlackRock’s Rick Leader, high levels of income in the bond market are now “generational opportunities” for investors. “I was waiting for 20 years of my life for some transactions,” he said in an interview with CNBC, pointing to years of low interest rates that ended in 2022. Bond yields are inversely proportional to price. That revenue is now a priority that bond term is no longer a reliable hedge, explained the leader, chief investment officer at global bonds. In other words, bonds do not necessarily offer ballast against stock prices. “In a sense, the ability to consistently provide high coupons to global portfolios can act as a sort of breakwater against stock market drawdowns, especially when periods themselves weren’t used to traditional functions,” he added that earning that revenue doesn’t necessarily mean that companies take excessive risks as they delegate and repay their debts during the post-Covid period. But the opportunity will not last forever, the leader told CNBC. He said he expects to boost productivity and innovation from the ongoing “large tech revolution.” It cuts inflation and ultimately brings interest rates, he added. Still, some labour softness could potentially impact the economy in the near future, leaders noted. However, he expects a fairly good second half of the year from a growth perspective, but heads towards the last quarter. “I think CEOs of many companies are sitting there waiting to see what happens with tariffs. I think it’s unlocking some of the spending on CAPEX (capital expenditure) and (research and development),” he said. President Donald Trump’s mutual tariff suspension ends on July 8th, with the deadline for transactions between the US and Europe being July 9th. But the president recently said that he might not follow the deadline, saying, “We can do anything.” The opportunities are that the curve front and belly remain most attractive, says Rieder, who is also the portfolio manager for Ishares Flexible Income Active ETF (BINC). The 30-day SEC yield for funds traded on the exchange is 5.45% with a net expense ratio of 0.40%. Binc Ytd Mountain Islands Flexible Income Active ETF leaders to date still support European credit and surrounding sovereign debt, such as Spain and Italy. The yields are great and he said he’s not too worried about supply. “If you’re a dollar investor, and if this is something we haven’t seen in decades, we get the advantage of cross currency swaps,” the leader said. “Everyone is trying to hedge their US dollar exposure. Being a dollar investor, you actually get profits and that’s incredible,” he added. “We increase our profits of 2% and 2.5% to be a lender in Europe, which makes all the difference in the world for dollar investors.” He also likes US securitized products. They are the ministries MBS, which accounts for 35% of BINC’s assets and accounts for a portion of commercial mortgage-backed securities and their allocations. Leaders have reduced BINC’s allocation to investment grade debt, and now accounts for 7% of ETFs. Instead, he said he would rather earn income from high-yield bonds or agency MBs. Market Risks The biggest risks facing fixed income investors today is the rising federal deficit, the leader said. The US budget deficit reached $316 billion in May, according to the Treasury Department. “There’s still a risk that we have to continue with these (Treasury) auctions,” he said. “Long interest rates are very unstable and sensitive to inflation.” The leader believes inflation is falling, but he is not sure if it will happen in the coming months. “In the long run, I think we can overtake debt,” he said. In the short term, “the market tends to feel vulnerable.” “I look at every 10, 20 or 30 auctions,” he added. “In the bond market, for me, when they get them, it’s almost a sigh of relief.”
BlackRock Rick Leader now sees “generational opportunities” in revenue
