In an exclusive interview with CNBC, Rick Rieder, BlackRock's chief investment officer for global fixed income, emphasized that investors can now build diversified portfolios yielding over 7% with less than three years of duration and an average credit quality of A-. He noted that while high yields typically indicate economic distress, the current strong economy mitigates concerns about defaults.
Rieder pointed to investment-grade corporate bonds, particularly from major tech firms like Alphabet, Amazon, Meta Platforms, and Oracle, which have collectively issued approximately $228.4 billion in bonds this year. He has increased the allocation to investment-grade corporates in his iShares Flexible Income Active ETF from 8.5% to 14.3%.
However, he cautioned investors to remain patient as interest rates may rise further, impacting returns. Rieder also warned about risks associated with rising government debt and the potential crowding-out effect from increased bond supply from AI companies.
He remains optimistic about the high yields available in investment-grade bonds, advising investors to take advantage of this historic opportunity while being selective in their choices