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Morningstar’s bond panel, The Search for Yield in an Ultra-Low Interest-Rate World, featured Vanguard’s Anne Mathias and BlackRock’s Rick Rieder. The discussion was moderated by Morningstar’s Sarah Bush.

Anne Mathias pointed to the Fed’s focus on employment and since we’re a long way off full employment, she ventured that “the Fed is not going to be pressured to raise rates for a very, very, very long time.”

BlackRock’s Rick Rieder’s main concern is the path of the virus and a vaccine. Fiscal and monetary stimulus was significant with the Fed having done an “A+ job, but now rates are at zero and you’ve pumped liquidity into the system so there’s not much more they can do.” It’s about fiscal stimulus now.

With headwinds afoot, and lower for longer interest rates, the search for yield is more important than ever.

Here are the panelists’ thoughts:  

BlackRock’s yield hunt:

  • Low rates – Fed is making “safe” asset classes not appealing to try to force investors elsewhere
  • Look at international markets like China
  • Parts of high yield market in Europe are appealing
  • Securitized market is of interest
  • Owning TIPS makes sense
  • Gold is good if the dollar is under pressure
  • Seek dividends from financially strong companies  

Vanguard’s search for income:

  • There has been a tremendous surge for income strategies
  • Look for alpha in corporates – careful analysis within the lower quality bands is important  
  • Incorporate an inflation protected piece into your portfolio
  • In duration curve in corporate credit – be sure to allocate across the curve