Bonds are once again commanding attention—not only as a safe harbor in uncertain times but as a dynamic tool for advisors seeking to play offense in a shifting market environment.
Tony Kelly, co-founder of BondBloxx and former global ETF head at Goldman Sachs Asset Management, says the fixed income landscape has fundamentally changed. “It’s definitely getting more nuanced,” Kelly told CNBC’s ETF Edge this week. “Advisors are being a bit more thoughtful because there is more opportunity in fixed income now that rates are no longer close to zero.”
That comment captures the growing sentiment across advisory circles: after years of negligible yields, fixed income is reclaiming its place as both a core portfolio anchor and a source of tactical returns.
Fixed Income’s Comeback Story
For much of the post-financial crisis decade, bonds served primarily as ballast—reducing volatility and preserving capital while offering little in the way of yield. With central banks holding policy rates near zero, investors turned to equities, private markets, and alternatives to generate return.
But that environment has shifted dramatically. The Federal Reserve’s rate-hiking cycle pushed yields to levels not seen in over a decade. And now, with the Fed cutting rates for the second time this year—bringing the benchmark rate to 3.75%–4%—the playbook for advisors is evolving once again.
While the rate is still far from the zero bound, the combination of moderating inflation, cooling growth, and policy easing is creating new opportunities across the yield curve.
The 10-year Treasury yield, which briefly surged past 6% earlier in the cycle, has eased back below 4% following the Fed’s latest move. Over the past month, the yield has dropped nearly 200 basis points and remains down roughly 11% year-to-date. That shift in yields has driven strong total returns across bond markets—reminding investors that duration, long ignored, can once again work in their favor.
From Defense to Offense
Kelly argues that fixed income is no longer just about stability—it’s about strategy. “Bonds are becoming an active source of diversification, income, and tactical opportunity,” he said.
Advisors, in his view, are increasingly using bond ETFs to express market views, manage duration risk, and enhance yield. Rather than holding bonds solely for defensive positioning, many are rethinking allocations to capture upside potential and mitigate volatility elsewhere in client portfolios.
BondBloxx, founded in 2021 by a team of ETF veterans, was built around that very premise: to give investors precise, efficient access to specific segments of the fixed income market. The firm’s suite of targeted ETFs includes exposures ranging from high-yield sectors to Treasury duration buckets—tools that allow RIAs to construct more nuanced strategies without sacrificing liquidity or transparency.
Emerging Markets: A Standout Performer
One area that Kelly sees as particularly compelling is emerging market debt.
“It’s one of the top returning asset classes in the fixed income market this year,” he noted. Indeed, with developed market yields compressing and global growth stabilizing, emerging market sovereign and corporate bonds have benefited from a favorable mix of carry and capital appreciation.
For advisors comfortable with measured risk, EM debt offers diversification benefits that can complement U.S. core holdings. The asset class has also become far more accessible through ETF structures, reducing barriers that once limited participation to institutional investors.
The New Appeal of Private Credit
Another fast-growing area of focus for advisors is private credit—and specifically, the emergence of private credit ETFs.
Traditionally, private credit exposure has been the domain of institutional investors, family offices, and high-net-worth clients willing to sacrifice liquidity in exchange for higher yields. But that’s beginning to change.
Kelly sees robust interest in ETF vehicles that deliver institutional-style yield while maintaining daily liquidity—an innovation that could fundamentally expand access to this asset class.
“I don’t know if that is something you would necessarily refer to as plain vanilla,” Kelly said, “but there is a lot of interest in that subset of the fixed income asset class to be in an ETF wrapper for clients. We do have a private credit ETF product in the market now, and we’ve got one in registration.”
For RIAs, this evolution opens the door to strategies once reserved for private funds. ETFs focused on asset-backed lending, middle-market loans, or structured credit can now fit within client portfolios that require liquidity, transparency, and daily pricing. That’s a meaningful shift for advisors who want to diversify fixed income allocations beyond traditional corporate and government bonds.
Why Advisors Are Paying Attention
The resurgence of yield has reignited advisor interest in fixed income as a true return generator. But it’s not just about income. In a market environment where equities remain volatile and correlations between asset classes are less predictable, bonds once again offer diversification benefits that had eroded in the zero-rate era.
The opportunity now lies in implementation. Advisors must balance several factors:
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Duration positioning: With rates falling, longer-duration bonds can offer capital appreciation potential, but also higher interest rate sensitivity.
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Credit exposure: Credit spreads have tightened, yet selective exposure to high yield, bank loans, or private credit can enhance returns.
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Global diversification: Non-U.S. bonds, particularly in emerging markets, can deliver uncorrelated performance drivers and potentially higher income.
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Liquidity considerations: ETFs have transformed how advisors access fixed income markets, offering transparency, low cost, and intraday tradability.
Kelly believes advisors are better equipped than ever to fine-tune these exposures. “There’s a sophistication now in how fixed income is being used,” he said. “Advisors understand that it’s not just a place to park cash—it’s a way to express macro views and actively manage portfolio risk.”
The ETF Advantage
BondBloxx’s growth mirrors a broader trend across the ETF industry: the institutionalization of fixed income exposure.
Fixed income ETFs now hold more than $2 trillion globally, and inflows have accelerated as investors seek flexible, transparent alternatives to mutual funds and individual bonds. The ability to trade intraday, rebalance efficiently, and target specific credit or duration buckets makes ETFs a powerful tool for modern portfolio management.
For RIAs, the ETF wrapper also simplifies client communication. Explaining duration risk, credit exposure, and yield potential becomes easier when all holdings are transparent and priced throughout the day. That transparency also aligns with fiduciary standards, reinforcing the advisor’s value proposition around accountability and clarity.
BondBloxx has carved out a niche by specializing in granular fixed income exposures—something Kelly sees as essential in this new era of active bond management. “When you can target the precise part of the market you want exposure to, you can construct better risk-adjusted portfolios,” he said.
Tactical Plays and Core Holdings
Advisors are also rethinking how they use bonds tactically. Rather than static core positions, many are adjusting exposures based on the economic cycle, inflation trends, and monetary policy signals.
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If the Fed continues easing, longer-duration Treasuries and investment-grade corporates may deliver attractive total returns.
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If inflation proves sticky, short-duration credit or floating-rate instruments can help protect purchasing power.
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If global growth stabilizes, emerging market and high-yield bonds could benefit from spread tightening.
This kind of tactical flexibility—enabled by ETF liquidity—allows advisors to position portfolios more dynamically without sacrificing the income benefits of fixed income.
The Road Ahead for Fixed Income
The message from Kelly and others in the ETF space is clear: the fixed income market is no longer a one-dimensional trade. It’s an active arena where advisors can add significant value through strategy and structure.
As yields settle into a more normalized range, fixed income portfolios can once again deliver both stability and return. But the winners in this environment will be the advisors who move beyond generic exposure—those who tailor fixed income strategies to client goals, risk tolerance, and time horizon.
The next phase of bond investing will likely center around three themes:
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Precision: Targeted exposures that align with specific objectives.
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Innovation: New vehicles like private credit ETFs that expand access to nontraditional income sources.
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Adaptability: The ability to shift allocations as policy, inflation, and market dynamics evolve.
In a world where bonds can once again play offense, the role of the advisor becomes even more critical. The opportunity is not just to capture yield—but to craft portfolios that use fixed income strategically, intelligently, and with purpose.
As Kelly put it, “Fixed income is no longer the quiet corner of the portfolio. It’s where a lot of the action is happening—and advisors are recognizing that.”
