Long-term U.S. Treasury yields are approaching their highest levels since before the 2008 financial crisis, offering fixed-income investors a rare opportunity. While rising yields generally result in falling bond prices—something seen in 2022—they also increase the income potential for new bond investments. Alongside the surge in Treasury yields, credit spreads have widened, especially for riskier bonds. This spread widening enhances the appeal of fixed-income assets, particularly for investors seeking to secure attractive long-term yields, a key determinant of bond performance over time.
Rising Yields and Wider Spreads Create Opportunities Across Treasury and High-Yield Bonds
A recent example of rising yields is the 10-year Treasury note, which hovered between 3.60% and 4.80% and settled at 4.50% in mid-May 2025 after Moody’s downgraded the U.S. credit rating. This level hasn’t been seen since 2007. Predicting future interest rate movements remains difficult, but current yields are considered attractive by many investors. These elevated rates present a unique opportunity for those looking to benefit from the robust income potential of high-quality bonds during a time of economic transition.
Surging Yields and Credit Spreads Open Rare Bond Opportunities Not Seen Since 2007Credit-sensitive bonds have also become more affordable due to economic uncertainties and evolving global tariff policies. High-yield bonds, in particular, have seen spreads widen by roughly 100 basis points compared to Treasuries, indicating both increased risk and income potential. With yields exceeding 7.0%, these instruments offer near-equity-level returns with generally lower volatility. However, investors should be cautious and appropriately size their exposure to high-yield offerings, given their potential for increased volatility compared to core bond strategies.
Tactical Bond Strategies Deliver Higher Yields Amid Market Uncertainty and Shifting Conditions
Several actively managed exchange-traded funds (ETFs) provide avenues to capitalize on higher yields. Fidelity Total Bond (FBND), a core-plus bond strategy, includes up to 20% in high-yield and emerging-market debt, producing a 5.0% SEC yield as of March 2025. JPMorgan Income (JPIE) offers a 5.5% SEC yield and utilizes a bottom-up approach focused on securitized and high-yield debt. Meanwhile, T. Rowe Price Floating Rate (TFLR) emphasizes bank loans, delivering a 6.9% yield by investing in floating-rate, non-investment-grade debt. Each fund is managed by experienced teams and supported by deep research capabilities.
Market volatility increases the attractiveness of actively managed bond strategies, as experienced managers are better equipped to handle risks and take advantage of pricing inefficiencies. Although these funds often have higher expense ratios, skilled active managers can outperform passive options over time. This makes actively managed ETFs a strong choice for investors aiming to generate income while dealing with the challenges of a shifting and uncertain fixed-income environment.
