Fixed Income Finds Its Moment: Focus on Credit or Duration?

After years in the investing shadows, fixed income is back in the spotlight—and a standing-room-only panel at the Exchange conference in Las Vegas proved it.

“There are seats up front,” joked moderator Todd Rosenbluth, head of research at VettaFi, surveying the packed room. “Standing room only for fixed income. It’s been a long time.”

Rosenbluth was joined by Tony Kelly, co-founder of BondBloxx, and Alexander Morris, CEO of F/m Investments, to discuss where fixed-income opportunities lie in a post-rate-hike world and how ETF innovation is reshaping access to the bond market.

Will the Fed Cut?

While the Federal Reserve shifted to a more dovish posture in late 2024, both panelists agreed that further rate cuts in 2025 aren’t guaranteed.

“We think it’s tough for the Fed to cut right now,” said Kelly. “Inflation is still above the 2% target. Maybe one cut, maybe two—but probably unlikely in the near future.”

Morris echoed the sentiment, saying, “If [Fed Chair] Powell and the Fed had their druthers, they’d do nothing. Just cancel interviews, stay quiet and hope for the best. They’ve worked hard to regain credibility and don’t want to throw it away on political policy uncertainty.”

He warned that the Fed is now facing a different kind of volatility—one rooted in tariffs and unpredictable fiscal policy. “They have tools to fight inflation,” Morris said. “They don’t have tools to fight deflation or fear of the unknown.”

Inflation Fears Still Linger

Despite falling inflation in 2024, concerns remain elevated.

“One in five people are deeply concerned inflation will go above 10%,” said Morris. “That’s probably an overreaction, but tariffs are inherently inflationary until they destroy growth. Then they become deflationary.”

To address these concerns, F/m launched the Ultrashort Treasury Inflation-Protected Security ETF (RBIL)—designed to strip out duration and provide a pure hedge against inflation.

“You’re really getting exposure to headline CPI, plus some return from short-term Treasuries,” Morris said. “It’s an insurance policy against inflation without the pitfalls of gold or equities.”

Credit vs. Duration

With uncertainty around monetary policy and inflation, advisors are increasingly favoring credit exposure over duration, Kelly noted.

“We like credit over duration,” he said. “In investment-grade, we favor short-term triple-Bs in particular. And in high yield, we’ve seen interest in the lower-rated triple-Cs, which are yielding 11%—with lower volatility than equities.”

That risk-adjusted return has made high yield more attractive, especially for those trimming equity exposure and reallocating to fixed income.

Private Credit in the Spotlight

One area gaining serious attention is private credit. Advisors, Kelly said, are increasingly looking for access to the space in a liquid, transparent ETF wrapper—without the lockups and limitations of interval funds and private funds.

“It’s about $30 trillion globally and incredibly diverse,” he said. “We focused on the $5 trillion market for loans to middle market companies.”

The BondBloxx Private Credit CLO ETF (PCMM) invests in CLOs managed by the likes of Ares, Apollo and Blackstone.

“These trade like bonds, have a CUSIP and clear through DTC,” said Kelly. “It gives you diversified exposure to private credit in a liquid format.”

The Case for Fixed-Income ETFs

So why fixed income—and why now?

“We’re in a very different place than the last 10 years,” Kelly said. “You still get diversification benefits, but now there’s income too. Short-term Treasuries yielding 4%. Investment-grade corporates yielding 5% [to] 6% and high yield even higher.”

Morris added that the “income” in fixed income is finally back.

“For a long time, fixed income was ‘choose your flavor of zero,’” he said. “Now there’s yield again—and you can access it with transparency, liquidity and precision. ETFs have made the bond market healthier.”