JPMorgan asset manager cites 6.5% yield in high-quality credit

Priya Misra, a portfolio manager at J.P. Morgan Asset Management, described the current fixed income market as a once in a generation opportunity, noting that investors can secure yields of 6.5% in high-quality corporate debt without lowering credit standards. Misra told CNBC's "ETF Edge" this week that the availability of such returns in the highest quality companies allows investors to take credit risk without descending into lower-rated tiers.

The strategy, Misra argued, offers a diversified set of returns for investors seeking to reduce concentration in artificial intelligence stocks. She observed that many portfolios carry significant AI exposure, whereas fixed income provides exposure to Treasury trades and credit sectors outside of technology. This diversification, she said, is distinct from a pure tech or AI trade.

Misra co-manages the JPMorgan Core Plus Bond Fund ETF (JCPB), which holds nearly $16 billion in assets. According to the firm's website as of Aug. 31, just over three-quarters of the fund's holdings are in BBB-rated debt and above. While maintaining a preference for investment grade bonds, Misra stated that the fund has recently increased its exposure to double-B and single-B debt following a widening in high yield spreads. She also noted that the fund began increasing duration in the last few days, a move driven by the belief that the recent rate move may be nearing its end.

Despite the bullish outlook on yields, the JPMorgan Core Plus Bond Fund ETF has declined more than 5% since the start of the year as of Friday's close, according to FactSet data. Misra emphasized the need for a bottom-up approach, examining bonds and sectors individually to ensure companies are not over levered. She expressed specific concern about how higher rates could impact the housing market.

Joanna Gallegos, co-founder of BondBloxx, also advised investors to capitalize on what she called historically attractive yields across debt markets. In the same interview, Gallegos argued that adding corporate debt to a portfolio can offset volatility and serves the investor's interest by capturing income that has returned to fixed income. Her bull case rests on the stability and high level of base rates, as well as strong corporate fundamentals and continued economic growth. Gallegos suggested that these positive factors are often overlooked in narratives focused on Treasury rates.

BondBloxx specializes in fixed-income exchange-traded funds across sectors including Treasury, corporate, private credit, and emerging markets. One of its products, the BondBloxx Private Credit CLO ETF (PCMM), was down 0.6% for the year as of Friday's close, according to FactSet.