Take advantage of rising yields with this multi-sector income ETF
After the Federal Reserve raised interest rates another 75 basis points on Wednesday, the yield on the 2-year Treasury note rose 15 basis points to 4.113%, its highest level since 2007. During this time, the yield on the benchmark 10-year Treasury note rose. one basis point to a high of 3.64%, the highest level since February 2011.
Some investors believe that this large inversion, with short-term rates higher than long-term rates, suggests that a recession could be on the horizon.
The Fed raised its key rate by three-quarters of a percentage point, bringing it to a range of 3% to 3.25%. This is the third consecutive rate increase of 0.75%. Fed Chairman Jerome Powell said in a prepared statement that the U.S. central bank also “expects continued increases in the target range to be appropriate.”
So, as yields rise, fixed income investors may want to American Century Multi-Sector Income ETF (MUSI). MUSI seeks to deliver high levels of current income and attractive risk-adjusted returns over a full market cycle.
According to its product website, MUSI invests in a diversified portfolio of investment grade, high yield (up to 65%), securitized corporate and emerging market debt securities. Sector allocation decisions are managed tactically, based on the global macroeconomic outlook and assessment of relative valuation between sectors. Teams of sector specialists select individual bonds based on their own bottom-up fundamental analysis.
The fund is actively managed, offering investors the opportunity to gain exposure to more flexibility and risk management strategies. With the help of a professional team of portfolio managers, MUSI offers investors dynamic exposure to the fixed income market with respect to its stock selection.
The fund comes with a 30-day SEC yield of 4.8% as of July 29. While the fund invests in higher quality corporate debt securities, MUSI will deepen riskier credit to extract more yield.
In terms of duration, the fund focuses more on short-term and medium-term debt. The weighted average life to maturity on July 31 is approximately 6 years.
With the ability to enter and exit positions as the market environment deems necessary, the fund has greater flexibility in a current market environment where rate hikes are common. Additionally, it gives MUSI additional risk management by allowing fund managers to rotate and adjust portfolio holdings whenever necessary.
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