HomeMost PopularEmbracing a Positive Outlook: Seizing Opportunities in Long-Term Bonds

Embracing a Positive Outlook: Seizing Opportunities in Long-Term Bonds

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As anticipation builds for potential interest rate cuts by the Federal Reserve, markets are gearing up for the shift.

An insightful assessment by Invesco’s chief global market strategist, Kristina Hooper, delved into the reactions of markets to economic cues in March. The year-over-year core PCE data for March signaled a slight dip from February, a move that Federal Reserve chair Jerome Powell viewed positively.

Describing the quarter as a period of embracing risk, Hooper highlighted how markets largely brushed off disappointing data and hawkish commentary from central bankers, despite some initial reservations. Expectations for ongoing disinflation in Western developed economies and corresponding rate cuts by central banks are fueling market optimism. The consensus is for a temporary global economic slowdown, followed by a swift recovery. This confidence is evident in the broadening of markets in recent weeks,” Hooper explained.

The robust performance of Treasury yields underpins the case for investing in intermediate-duration bonds. Opting for longer-duration bonds offers investors protection against reinvestment risk, coupled with the potential for higher yields amid interest rate drops.

Invesco’s array of bond ETFs provides investors with a range of options based on preferred bond class and duration. For those inclined towards safer intermediate-duration bonds, the Invesco BulletShares 2028 Corporate Bond ETF (NYSE Arca: BSCS) stands out. BSCS concentrates its assets in investment-grade bonds maturing in 2028.

Investment-grade bonds come with reduced default risk and the pursuit of stable returns. With a gain of approximately 3.25% in the past 12 months and over $700 million in fund inflows in the last six months, the fund demonstrates steady performance.

Balancing Risk with Return

For investors willing to embrace more risk, the Invesco BulletShares 2028 High Yield Corporate Bond ETF (BSJS) offers the same duration with a higher risk profile. BSJS primarily invests in high-yield junk bonds maturing in 2028.

While junk bonds pose a heightened default risk, the strong performance of BSJS suggests that the potential rewards may outweigh the risks involved. The fund has surged by 9.18% over the past year and attracted $96 million in fund flows in the last six months.

Investors seeking to tailor their fixed income portfolio can leverage the BulletShares family of funds to achieve their desired mix. The range of BulletShares funds covers bonds maturing between 2024 and 2033. High-yield funds come with net expense ratios around 42%, while the rates for investment-grade options are closer to 10%. Invesco presently boasts 221 ETFs listed in the United States, managing assets exceeding $512 billion.

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Read more on ETFTrends.com.

Author views and opinions expressed do not necessarily mirror those of Nasdaq, Inc.

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