Quick Take:
With the first rate cut of 2025 in the books, the prospect of additional cuts only adds to the wall of worry for fixed income investors who are dealing with enough market uncertainty. That said, investors will want to diversify their income exposure, which the Vanguard Multi-Sector Income Bond ETF (VGMS) can easily do in […]
The post Income Diversification in the Convenience of 1 Active Fund appeared first on ETF Trends.
- Date: 2025-09-22 18:54:59
Analyst Notes
Yield movements in the bond market are influenced by interest rate changes, economic conditions, and inflation expectations. When yields rise, bond prices typically fall, impacting bond ETFs. Duration measures a bond’s sensitivity to interest rate changes; longer-duration bonds, such as those found in Treasury ETFs, are more affected by yield fluctuations than shorter-duration bonds.
Credit risk pertains to the likelihood of a bond issuer defaulting. Investment-grade (IG) ETFs generally carry lower credit risk compared to high-yield (HY) ETFs, which offer higher potential returns but come with increased risk.
Curve shifts occur when the yield curve changes shape, affecting different maturities differently. A flattening curve may indicate slowing economic growth, impacting both IG and HY bond ETFs, while a steepening curve often suggests rising inflation expectations.
For conservative ETF portfolios, consider maintaining a balanced exposure to both Treasuries and IG bonds to mitigate interest rate and credit risks. Additionally, diversifying across various maturities can help manage duration risk while providing stability in uncertain market conditions.
Original article:
Read on the original source
Disclaimer: The information is for educational purposes only and does not constitute financial advice or an offer to buy/sell any security. Investing involves risk, including possible loss of principal.
