One benefit of higher interest rates has been that many investors have become comfortable holding U.S. Treasuries, and with good reason—they’ve served as a low-volatility, liquid core holding. This is particularly true of investors who prefer taking risk in equity markets. However, the current economic and market conditions provide a powerful case for diversifying into a broader set of fixed-income opportunities. By selectively investing in sectors such as agency mortgages (MBS), asset-backed securities (ABS), commercial mortgage-backed securities (CMBS), and corporate debt, we see opportunity to enhance your portfolio’s income without taking on outsized risk.
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