Although traders' hopes for a June rate cut were dashed, income-seeking investors may find a golden opportunity to pick up bonds and high-dividend stocks at bargain prices. Consumer prices rose faster than expected in March, rising an annualized 3.5%, beating Wall Street expectations. The news sparked a selloff Wednesday, with the Dow Jones Industrial Average dropping more than 400 points and bond yields spiking as the yield on the 10-year Treasury rose above 4.5%. Traders are also bringing their rate cut expectations back to reality. Federal funds futures trading data currently suggests there is a roughly 70% chance the Federal Reserve will ease policy in September, according to the CME FedWatch tool. But it's not all bad news, especially for investors with a long-term approach. “Objectively, yields remain attractive for retail investors,” said Michael Carbone, a certified financial planner and financial advisor with Eppolito Financial Strategies in Chelmsford, Massachusetts. . “I think this will give people new opportunities.'' Bond revamp The Fed's rising interest rate environment has made certificates of deposit and Money His Market His funds very attractive to investors. . Consider that the 7-day current yield as of April 10th for the Crane 100 Money Fund Index is 5.13% annualized. The prospect of rate cuts being pushed back into the future can buy investors time to add duration to their bond portfolios. Duration is a measure of a bond's price sensitivity to changes in interest rates, and bonds with longer maturities tend to have longer durations. “Even if you're full on the short end of the curve, it's still advantageous to extend some maturities,” Carbone said. “You don't have to go for 30 years, but it's generally wise to extend the maturity by five to seven years.'' Intermediate-term bonds, or bonds with maturities between four and 10 years, are a good option for investors. provides the best of both worlds, locking in long-term yields and reducing reinvestment risk. At the same time, these stocks are not subject to the sharp price fluctuations seen with long-term bonds as interest rates change. “With the Fed's next action likely to be a rate cut later this year, investors will want to invest in the middle portion of the yield curve, specifically the three- to seven-year portion,” said BlackRock's head of iShares Investments. I think the time has come to step back.” Wednesday Strategy, Americas Gargi Chowdhury. He highlighted the iShares 3-7 Treasury ETF (IEI) and the BlackRock Flexible Income ETF (BINC) as investors begin to move away from cash allocations and diversify their fixed income sleeves. His 30-day SEC yield on IEI is 4.26% and his expense ratio is 0.15%. His actively managed BINC has a 30-day SEC yield of 5.6% and a net expense ratio of 0.4%. “It makes sense to lock in a certain yield rather than take on the risk of what might happen over the next year or two,” said Colin Martin, fixed income strategist at Schwab Center for Financial Research. “We like investment-grade corporate bonds. It's a great way to lock in yield.” Investors can tap into this space with ETFs. Vanguard Medium Term Corporate Bond ETF (VCIT) has a 30-day SEC yield of 5.33%. There is also the iShares 5-10 Year Investment Grade Corporate Bond ETF (IGIB), which has a 30-day SEC yield of 5.4%. The expense ratio for both funds is 0.04%. Looking for Dividend Investors Rising interest rates are eclipsing opportunities in high-dividend stocks, making them less attractive to income investors who can easily find risk-free yields. “Dividends are extremely important in a world of rising interest rates and rising inflation, because the only way to withstand rising costs of living is if your cash flow is This is because the number has increased beyond that.” , on CNBC's “Power Lunch” Wednesday. “You can find high-quality dividend producers that are growing their dividends at 8, 9, 10% per year, which is well above inflation.” He highlighted essential goods, utilities and energy as the best opportunities.
