According to Vanguard, bond investors have one of the most attractive entry points in decades to generate portfolio income. Though at the finest of the year, yields have risen across the Treasury and the credit market as a whole. The 10-year Treasury yield is currently around 4.4%, and the Vanguard Total Bond Market ETF (BND), which offers broad exposure to taxable investment grade US markets, has a 30-day SEC yield of 4.39%. Bond yields move inversely to the price. BND YTD Mountain Vanguard Total Bond ETF Towed To Tute bonds were also stabilizers for portfolio performance thanks to higher starting yields. “Higher income returns have helped us provide a cushion against recent market volatility, continuing to stabilize bond returns amid a larger swing in stocks,” the report said. Finding a Vanguard is seeing opportunities across the sector. Within Treasurys, the company expects a range-based environment and prefers duration exposure in the belly of the yield curve. When it comes to credits, investment-grade companies and other high-quality credits offer the most compelling and risk-adjusted returns, Colleen Cunniffe, head of global taxable credit credit research at Vanguard, told CNBC. “Investment grade companies remain fundamentally healthy with resilient margins, agile supply chains and stable productivity improvements. Vanguard Total Corporate Bond ETF (VTC) currently has a SEC yield of 5.09% and an expense ratio of 0.03%. Within VTC YTD Mountain Vanguard Total Corporate Bond ETF ETF AGE AGE AGEN THE AGENT, Cunniffe prefers short-term finances for relative value. Also, banks are capitalized according to their conservative liquidity needs, so they are basically healthy, she added. Additionally, Vanguard is an overweight BBB valuation industry issuer. The Cunniffe team also has an advantage thanks to its steady cash flow profile and strong demand for electricity from the rise of artificial intelligence. “This demand will encourage an increase in capital investments, increase bond issuance, and lead to an even more attractive valuation,” she said. Outside of head office bonds, Vanguard is currently seeing opportunities with mortgage-backed securities. Bond market spreads have fallen to some of the lowest levels in decades, but MBS spreads are higher than they have been in history. “There are several pockets in the market that offer attractive return possibilities with more limited upfront risk, such as agent-supported collateral mortgage obligations (CMOs), agent-supported designated pools, agent-commercial mortgage support securities, and still-high-quality AAA-rated home mortgage securities (RMBs),” she said. Vanguard Mortgage Backed Securities ETF (VMBS) has a 30-day SEC yield of 4.21% and an expense ratio of 0.03%. VMBS YTD Mountain Vanguard Mortgage Backed Securities until 2019. Finally, Vanguard is an overweight asset-backed securities (ABS) that prefers high-quality issuers and sectors that have proven track record across multiple economic cycles. “Structured products, particularly ABS, are slowing down the retracement of the spread we see in corporate bonds following recent tariff-related volatility,” Cunniffe said. “This, along with a new level of new ABS issue, created opportunities for attractive relative value for ABS.”
This is one of the most attractive opportunities for income, says Vanguard
