For the first time in over a decade, bond yields are starting to look attractive for conservative investors in search of 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 a top choice for investors. These bonds are currently yielding an eye-watering 9.62%.
I bond interest is a combination of two rates. The first is a fixed rate, and the other is an inflation-adjusted rate derived from the consumer price index. Sky-high inflation has led to soaring I bond yields.
While the I bond yield is expected to moderate from 9.62% to around 6% in November, it still remains extremely attractive as a risk-free investment.
Unfortunately, I bond purchases are limited to $10,000 a year per taxpayer, with some exceptions.
Short-Term Treasury Bonds Can Provide Security
For investors who have already purchased the maximum amount of I bonds and want to have cash ready for a market recovery, short-term Treasuries fit the bill.
The iShares Short-Term Treasury Bond ETF (SHV) is a good pick as a parking place for cash. It currently yields 2.83%. Holding Treasuries of less than a year to maturity, the ETF has minimal risk and will see rising payouts as interest rates continue to increase.
For investors wanting 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 — especially sensitive to changes in interest rates — has suffered from wild swings with the iShares 20+ Year Treasury Bond ETF (TLT), down over 30% year to date. With an inverted yield curve, added risk and a recent positive correlation to stocks, longer-term debt faces obstacles.
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 amid uncertain economic conditions.
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