BlackRock's Rick Rieder says high-quality bonds offer a historic yield opportunity with low default risk, recommending investment-grade credit for patient investors.
01Summary
- 01Rieder says investors can build a diversified portfolio yielding over 7% with less than three years of duration and A- average credit quality.
- 02The iShares Aaa-A Rated Corporate Bond ETF has a 5.68% 30-day SEC yield and 6.48 years effective duration.
- 03Hyperscalers including Alphabet, Amazon, Meta and Oracle have issued $228.4 billion in bonds year to date to fund AI infrastructure.
- 04Rieder's iShares Flexible Income Active ETF increased its investment-grade corporate allocation to 14.3% from 8.5% in July.
- 05The market sees a near 90% chance the Federal Reserve will raise rates in December, which Rieder expects but disagrees with.
02Why it matters
This matters because it suggests a rare chance for bond investors to lock in high yields with relatively low risk, but also highlights caution needed in non-investment-grade and AI-related credit amid rising rates and government debt.
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