Where BlackRock’s Rick Rieder sees income opportunity amid the market volatility

As investors search for income amid the market volatility, high-yield bonds are an attractive place to be, according to BlackRock’s Rick Rieder. Stocks bounced back Tuesday after suffering steep losses in the prior session that led the S & P 500 and the Dow Jones Industrial Average to their worst performances since 2022. Treasury yields also rebounded Tuesday, after the 10-year benchmark yield hit its lowest level in more than a year Monday. Meanwhile, credit spreads in corporate and high-yield bonds — which have been tight — are widening . “Credit is in the best fundamental shape I’ve ever seen it, probably in my entire career,” said Rieder, the firm’s global chief investment officer. “They have turned their debt out, the cash flow coverage is still good.” In fact, high-yield credit, also known as junk bonds, are no longer junk, he said. “It is in really good shape in terms of credit quality, much more in the way of BBs. A lot of high yield is moving up to investment grade.” Bonds rated BB+ and lower by Standard & Poor’s and Fitch, as well as those rated Ba1 by Moody’s, are considered high-yield. Rieder also manages the BlackRock Flexible Income ETF , which has about 20% of its portfolio in high-yield credit, its second largest sector holding. The fund has a 30-day SEC yield of 5.91% and a 0.40%. net expense ratio. BINC YTD mountain BlackRock High Yield ETF year to date He has been reducing some exposure to investment grade bonds. “You are going to get a lot of supply at lower rates.” His firm also recently launched the BlackRock High Yield ETF . The actively managed fund has a 30-day SEC yield of 6.85% and an expense ratio of 0.45%. Monday’s market sell-off was driven by fears of a recession amid concerns over Friday’s disappointing jobs report and questions over whether the Federal Reserve may have waited too long to cut rates. Rieder thinks the Fed should move the fed funds rate to 4% to 4.5% sooner rather than later. “Do they have to panic and do inter-meeting? No,” he said. However, the central bank should evolve their communication about the rate cut, he added. That said, he isn’t necessarily concerned about a recession. “The economy is in fine shape,” he said. “I think it is slowing and you are building slack. You clearly have a durable nature to inflation coming down so the Fed should move the rate to where it’s appropriate.”