In an article for IFAMagazine, Meg Brantley discusses how active fixed income ETFs staged a turnaround in early March. The asset class was moving lower as it seemed that the economy would continue growing at a rapid clip, adding further fuel to inflation.  However, there was a negative shock to the economy as Silicon Valley Bank and Credit Suisse had to be rescued. In turn, risks to the financial system climbed, and there was a stunning turnaround for fixed income. The 2-year Treasury note dropped 119 basis points in three days which was the largest drop since 1987. 

For financial markets, it was a major sea-change, and it seems to have marked the bottom in bonds which have been steadily trending higher. Odds of a recession and rate cuts in the first half of 2024 also climbed higher which further contributed to strength in fixed income. 

These events have contributed to volatility but also led to opportunity for active fixed-income managers. The forces of a hawkish Fed and raging inflation which dominated 2022 created a negative backdrop for fixed income. Now, the macro backdrop for fixed income has gotten more constructive especially with inflation and rates trending in the right direction. 

Finsum: In March, the landscape for active fixed income shifted dramatically. Looking forward, the asset class is offering some compelling opportunities.