WWith Analytics pricing in four price increases in 2022, Fed policy can dictate the fate of bond markets, but dynamic exposure can help counter the Fed.
Federal Reserve Chairman Jerome Powell testified before the Senate Banking Committee that he will do what is necessary to fight inflation. Benchmark Treasury yields fell during Tuesday’s trading session, sending bond prices higher as Powell indicated his desire to normalize monetary policy in 2022.
“We will really move over the course of this year to a policy that is closer to normal. It’s a long way back to normal from where we are,” Powell said.
Fixed income investors will certainly be looking for hawks when it comes to Fed policy, and bond investors are certainly hoping to get a few of them. So far, Powell hasn’t scored highly on the Hawks’ scale.
Edward Moya, chief market analyst at Oanda, says in a note to clients.
Get active exposure
A way to get dynamic exposure that will fluctuate with the market and subsequent Fed moves is to Flex Shares Core Select Bond Fund (BNDC). Active management helps eliminate the guesswork involved in selecting the bond ETFs that best fit an investor’s portfolio while maintaining the ability to make necessary position adjustments when the market deems it necessary.
Using an active management style, BNDC strives for total return and capital preservation. The fund invests at least 80% of its net assets in fixed income securities denominated in US dollars either directly or indirectly through exchange-traded funds and other registered investment firms.
“The ETF is actively managed by institutional fixed income managers at Northern Trust, a FlexShares fund advisor,” notes the FlexShares fund focus. “These managers aim to build a diversified bond portfolio with existing ETFs, using both the FlexShares family ETF and ETFs from other providers, to provide exposure across sectors of the fixed income market.”
For example, the fund captures exposure to key fixed-income asset classes such as Treasurys, corporate bonds, and mortgage-backed securities (MBS), while also selecting ETFs that offer more accurate and value-added exposures to a variety of products such as TIPS. Fund Focus adds.
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