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Actively managed fixed income ETFs gain attention amid Fed and yield moves
30-year Treasury yields recently reached their highest level in 19 years, sharpening focus on how bond ETFs handle duration and credit risk as conditions change.
ETF Trends highlights a shifting bond market backdrop, where advisors are weighing portfolio diversification and income benefits against renewed volatility concerns. The article points to a new Federal Reserve chair, Kevin Warsh, whose communications aim to reduce expectation-raising chatter, while other Fed officials are pushing for near-term interest rate hikes to address inflation.
The piece also notes that 30-year Treasury yields have recently hit their highest levels in 19 years. Against that environment, it argues that active fixed income ETFs may be better positioned to react to “market dislocations” and evolving risks in real time, including by adjusting duration, credit exposure, and sector allocations as economic and inflation conditions change.
ETF Trends contrasts that approach with passive aggregate bond ETFs, which are often heavily allocated to Treasuries and therefore may leave investors exposed to duration risk. It also says many passive corporate bond ETFs can be tilted toward the largest issuers, which may not fully meet some investors’ concerns about credit quality.
American Century’s Greg Torretti is cited saying active managers can pursue value across the fixed income spectrum, including the new-issues market and smaller or less-followed sectors, securities, issuers, and countries. He also says active managers can exit holdings when they believe securities have reached valuation potential, while passive indices must continue holding benchmark components.