In an article for ETFTrends, Ben Hernandez gave some reasons why there is still opportunity for fixed income investors in high-quality bonds, and some ETFs to consider. 2023 has seen a strong rebound for bonds after an abysmal 2022. 

The major factor is that inflation expectations have turned lower, while many see an endpoint to the Fed’s hikes later this year. Additionally, increasing odds of a recession have also resulted in inflows into fixed income ETFs. 

While the Fed is expected to hike one or two more times, this headwind is more than offset by slower economic growth and increasing risk of a credit crunch given the inverted yield curve and damage to the banking system. Another positive for fixed income ETFs is that yields are at their highest level in decades. 

Fixed income investors can take advantage of this favorable backdrop by investing in a  high-quality, short-duration ETFs. One example is the Total Bond Market ETF, which is composed of a variety of government, corporate, mortgage-backed securities, and international bonds. Another option is the Vanguard Short-Term Inflation-Protected Securities Index Fund. This is comprised of short-term, inflation-protected Treasury bonds. 

Finsum: 2023 has featured a strong rebound for fixed income ETFs. The major factors are a slowing economy, ending of the hiking cycle, and cooling inflation.