Treasuries are a good option for fixed income with that eye-popping 9.62% yield
For the first time in over a decade, bond yields are starting to look attractive to conservative investors seeking income. Here are some of the top picks to help provide returns and protection in a turbulent market.
Treasury I bonds, also known as Series I savings bonds, are an excellent choice for investors. These bonds currently yield 9.62%, which is attractive.
Bond interest is a combination of two rates. One is a fixed rate and the other is an inflation-adjusted rate derived from the consumer price index. Skyrocketing inflation has caused I bond yields to soar.
While the yield on I bonds is expected to moderate from 9.62% to around 6% in November, it still remains extremely attractive as a risk-free investment.
Unfortunately, purchases of I bonds are limited to $10,000 per year per taxpayer, with a few exceptions.
Short-term treasury bills can provide security
For investors who have already purchased the maximum amount of I bonds and want to have cash for a market rally, short-term treasury bills are a good fit.
The iShares Short-Term Treasury Bond ETF (SHV) is a good choice as a parking spot for the money. It currently yields 2.83%. Holding Treasury bills with a duration of less than a year, the ETF poses minimal risk and will see its payouts increase as interest rates continue to rise.
For investors who want a slightly higher yield, the iShares 0-5 Year Investment Grade Corporate Bond ETF (SLQD) is a good option. The ETF currently yields 4.5%, with low duration and credit risk.
Long-term debt should be avoided
Longer-term debt – particularly sensitive to changes in interest rates – has suffered wild swings with the iShares 20+ Year Treasury Bond ETF (TLT) down more than 30% since the start of the year. With an inverted yield curve, heightened risk and recent positive correlation to equities, longer-term debt faces hurdles.
Junk bond investments such as the iShares High Yield Corporate Bond ETF (HYG) – which offers a yield of 8.06% – may soon become attractive. But they warrant caution in an uncertain economic environment.
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