JPMorgan makes bullish call in fixed income space, suggests it's a once in a generation opportunity

J.P. Morgan Asset Management has expressed an optimistic outlook on a segment of the market that has seen less investment: high-quality fixed income. Portfolio manager Priya Misra described this moment as a rare opportunity for investors. In an interview with CNBC's "ETF Edge," she stated, "You can actually take credit risk in the highest quality companies and still get a 6.5% yield." Misra emphasized that this trend allows investors to maintain high credit quality without needing to compromise.

She highlighted that this investment strategy is especially relevant for those wary of overexposure to artificial intelligence stocks, which have dominated market discussions. “There’s a huge AI exposure,” Misra remarked. “What fixed income gives you is this diversified set of returns. It’s not just an AI trade or a tech trade. You have the Treasury trade. You have credit outside of AI.”

Misra co-manages the JPMorgan Core Plus Bond Fund ETF (JCPB), which boasts nearly $16 billion in assets under management. As of August 31, over 75% of its holdings are in debt rated BBB or above, according to the firm's website. She also mentioned that the fund has been increasing its allocations to double-B and single-B rated bonds due to a widening in the high-yield spread. “We like some investment grade. And now, we've started in the last few days to increase some duration as well, thinking we may be nearing the end of that rate move,” Misra added. However, the JPMorgan Core Plus Bond Fund ETF has seen a decline of more than 5% this year as of the latest market close, according to FactSet.

Misra advised investors to assess bonds on a case-by-case basis and evaluate sectors carefully, especially in light of the potential impact of rising interest rates on the housing market. Her cautious approach reflects concerns about companies becoming over-leveraged in a high-rate environment.

Joanna Gallegos, co-founder of BondBloxx, is also encouraging investors to seize the opportunity presented by “historically attractive” yields in the debt markets. In the same interview, she suggested that adding corporate debt to investment portfolios could be beneficial. “It’s really in the investor’s best interest to start looking at the income that’s back in fixed income. It can offset the volatility in your portfolio,” Gallegos stated.

Part of her bullish perspective is based on the stability of current base rates. “The fundamentals of these corporations are so strong, and the economy continues to grow,” she added, noting that this positive narrative often gets overshadowed by discussions surrounding Treasury rates. BondBloxx specializes in fixed-income exchange-traded funds across various sectors, including Treasury, corporate, private credit, and emerging markets. One of its offerings, the BondBloxx Private Credit CLO ETF (PCMM), has experienced a slight decline of 0.6% this year, according to FactSet data.