The Federal Reserve held its target interest rate steady at 3.5% to 3.75%, but long-dated Treasury yields surged sharply, with the 10-year note reaching its highest level since January 2025 and the 30-year bond hitting its highest since July 2007. Market expectations now show a 65% probability of a rate hike at the Fed’s September meeting. In this environment, short-duration bonds and money market funds offer attractive yields while limiting exposure to price volatility. AAA-rated CLOs present compelling opportunities, with funds like the Janus Henderson AAA CLO ETF and the iShares AAA CLO Active ETF yielding 4.77% and 4.80% respectively. Experts recommend that investors focus on the short- to medium part of the yield curve to optimize risk-reward positioning.
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