BlackRock says these bonds have attractive yields — and can help insulate from AI disruption
There is still solid income to be had in bonds these days, but investors may also want to focus on those that are tied to the real economy, according to BlackRock’s recent spring outlook. While stocks rose and bond yields held steady on Friday to start the new month and new quarter, the market has been rocked by volatility this year. The Iran war and concerns about inflation, as well as fears over artificial-intelligence disruption, have weighed on investors. The 10-year Treasury had dipped below 4% just before the start of the Mideast conflict but is now closer to 4.35%. “We see increasing value in ‘HALO’ assets (Heavy Assets, Low Obsolescence), which favor tangible assets that may be less subject to AI disruption,” wrote Gargi Chaudhuri, BlackRock’s chief investment and portfolio strategist, Americas. For instance, the concern surrounding energy security has ramped up over the past two months. While it had already been a focus of attention due to AI needs, the jump in oil prices has escalated those worries, Chaudhuri said in a follow up interview with CNBC. West Texas Intermediate oil traded close to $102 per barrel on Friday. Yet HALO is just one component to consider, she noted. “We’re not telling you just to own it because of the HALO,” Chaudhuri said. “‘We’re telling you that it’s got the components that matter for the real economy right now, as well as the income associated with them in the front end of the curve — which allows them to be a really good, attractive income opportunity in a portfolio.” She likes to keep duration in the front end or the belly of the curve, ranging from zero to five or six years right now. The opportunities Those opportunities are in the securitized sector, including commercial mortgage-backed securities, residential MBS and some asset-backed securities , Chaudhuri advised. The MBS products are backed by pools of loans on either residential or commercial properties, such as single asset single borrower — which, as the name implies, is a single loan on one property or a number of properties owned by one borrower. MBB YTD mountain iShares MBS ETF year to date Residential MBS can be agency mortgages, backed by the federal government, or non-agencies, she said. “You have assets that are related to residential mortgages that are behind the payments that you’re getting,” she said. “Very much going back to the real economy.” The iShares MBS ETF , which tracks the investment-grade MBS market, currently has a 4.14% 30-day SEC yield and 0.04% expense ratio. The same goes for asset-backed securities, which can be pools of auto loans, for example. “It comes back to what do you want fixed income for in this environment? You want it to give you some income in your portfolio when you know volatility has been pretty concerning more recently,” she said.
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