While rising yields cause bond prices to fall, as they did in 2022, fixed-income investors can take advantage of elevated yields to pick up higher levels of income.
This has made bonds more attractive for investors looking to lock in healthy yields, the largest driver of long-term bond performance.
It’s difficult to predict interest-rate movements from here, but the opportunity to take advantage of these robust yields makes this a compelling time for bond investors.
Fidelity Total Bond FTBFX is a reliable intermediate-term core-plus bond strategy that uses its flexibility to manage across investment-grade credit, mortgage-backed securities, and Treasuries.
The fund’s 6.9% SEC yield offers investors higher income, but the lower-grade credit of bank loans can mean larger drawdowns in periods of credit stress.
Treasury yields for the long run are almost at their highest points since the global financial crisis of 2008. Bond prices decline as yields rise, as they did in 2022, but fixed-income investors can benefit from higher yields by obtaining higher income levels. In addition to raising long-term Treasury yields, recent market events have also caused spreads among credit-sensitive bonds—the price that investors pay to assume default risk—to widen. Since healthy yields are the main factor influencing long-term bond performance, this has increased the appeal of bonds to investors.
The yields on 10-year Treasury notes, which were at 4 points 50 percent in mid-May 2025 following Moody’s downgrade of the US credit rating from Aaa to Aa1, have recently fluctuated between 3 points 60 and 4 points 80 percent. They haven’t accomplished that level since 2007. Although interest-rate movements are hard to forecast from here, bond investors find this to be a compelling time to invest because of the chance to benefit from these strong yields.
Due to a changing outlook on global tariffs, credit-sensitive bond valuations have also recently become less expensive due to economic uncertainty. The spreads between high-yield bonds and Treasuries, which represent the riskier end of the credit spectrum, increased by roughly 100 basis points, indicating both increased risk and chances to benefit from strong yields. Although they are still far from the 2008 peak, broad high-yield market yields are over 7.0 percent, which is close to more recent highs in 2012, 2016, and 2020. This is a representation of the possibility of less volatile, equity-like returns. Investors should adjust their positioning to account for the fact that high-yield portfolios may be more volatile than multisector and core-plus bond offerings.
The strategies listed below each offer an active exchange-traded fund vehicle and have the potential to yield higher incomes.
Fidelity Total Bond FTBFX is a dependable core-plus bond strategy with an intermediate duration that leverages its versatility to manage Treasuries, mortgage-backed securities, and investment-grade credit. Up to 20% of assets may be made up of emerging-markets and high-yield debt. Additionally, Ford O’Neil has one of the most comprehensive analyst teams in the business and has been successfully guiding this strategy for more than 20 years. The portfolio’s 5point 0 percent SEC yield was about 40 basis points higher than a comparable core-bond passive ETF because, as of March 2025, it contained roughly 10point 5 percent below-investment-grade debt, which was more than its typical peer. With lower costs, the strategy—which has a Morningstar Medalist Rating of Gold—is offered as an active ETF (ticker FBND).
The value-driven strategy used by JPMorgan Income JGIAX to produce its 5 percent SEC yield (as of April 2025) favors securitized debt and a healthy dose of below-investment-grade bonds. Leading this Silver-rated fund is multisector bond expert Andrew Norelli, who enlists the help of a small army of sector experts, portfolio managers, and fundamental research analysts to drive positioning for this bottom-up approach. To balance the portfolio, the team includes high-yield credit and emerging-markets debt, but they prefer the steady cash flows of mortgage and asset-backed securities. Additionally, it aims to disburse monthly income consistently. J. P. With a lower expense ratio, Morgan provides this strategy as an active ETF (ticker JPIE).
Best-in-class bank-loan funds that include non-investment-grade, floating-rate debt include the bronze-rated T Rowe Price Floating Rate PRFRX. The manager of the company’s high-yield and bank-loan franchise, Paul Massaro, has been with the fund since 2009. A knowledgeable team of credit researchers evaluates relative value and examines the company’s fundamentals. The fund’s 6 percent SEC yield gives investors a higher income, but during times of credit stress, the lower-grade credit of bank loans may result in greater drawdowns. The strategy offers a less expensive ETF option (ticker TFLR).
Due to their ability to manage risk and capitalize on market disruptions, active fixed-income strategies may also benefit from market volatility. Even though these tactics usually come with greater financial obstacles, an effective active manager can provide greater long-term value than passive solutions.