CNBC: McNerncy, Schneider on USBFs
CNBC published, "Bond ETFs are bouncing back this year. Here's why." The piece excerpts from a video interview with ultra-short ETF managers James McNerny from JPM Asset Management and Jerome Schneider from PIMCO. (Note: Both PMs will be speaking at next month's Bond Fund Symposium, March 23-24, 2023, in Boston, Mass. Click here for details.) CNBC.com writes, "After a dismal 2022 for fixed income funds, bonds are steadily regaining steam in the new year thanks in part to an inverted yield curve. Approximately $200 billion flowed into bond exchange-traded funds last year, but the funds have amassed roughly $26 billion in inflows in January alone." They quote Todd Rosenbluth, head of research at VettaFi (to Mike Santoli on CNBC's 'ETF Edge' last Monday), "`There’s now income within the fixed income ETFs that are available. We've seen higher-quality investment-grade corporate bond ETFs. We've seen high-yield fixed income ETFs see inflows this year, as well as some of the safer products." JPMAM's McNerny comments, "We have to take a look at all the macro factors and look at what's driving bond yields and credit spreads right now.... We think that there is a high enough likelihood priced into credit spreads in the front end of the curve right now that there is a harder landing potentially to come." The article continues, "Given the inverted shape of the yield curve, JPMorgan Ultra-Short Income ETF (JPST) offers a portfolio comprised of short-term, investment-grade bonds. According to JPMorgan, the fund is the largest actively managed ETF in the industry, growing to $24.2 billion in the past 5 1/2 years. McNerny suggested that, with valuations in the red, spreads are too tight to compensate for the possibility of a harder landing. 'When we break down the flows that we're seeing,' McNerny said, 'we're seeing flows into higher-quality, longer-duration products, and credit products on the front end of the curve. Those have been the lion's share of the majority of the flows that we've seen." CNBC's update adds, "Jerome Schneider, managing director at Pimco, said that fixed income funds are gaining popularity because they offer investors attractive yields in an uncertain economic environment.... 'For investors right now,' he continued, 'we have to really be looking at how to think about sectors and allocation in terms of portfolios. And insulating those portfolios to the outlooks, which may not necessarily be 100% convinced that the soft landing is here at hand.... More holistically, what investors really need to be doing is pivoting and putting portfolios in that position for maintaining some optionality." Finally, it says, "He advised that means seeking higher liquidity while balancing the Fed's tactic for fighting inflation long term. More importantly, he said, for the evolving evolutionary process that we see with regard to earnings and corporate earnings specifically. 'That's going to remove some clouds as we get further along into the year,' Schneider said."
