How You Can Take Advantage of Persistently Elevated Bond Yields

Inflation has proved more stubborn than expected over the past 18 months. Tariff-driven price pressures and persistently elevated energy costs have contributed to a sustained rise in longer-term interest rates, keeping Treasury yields near levels unseen since before the 2008 global financial crisis. This is good news for bond investors.

The 10-year Treasury note yields ranged between 3.70% to 4.87% from the start of 2023 through early May 2026, settling at 4.45% in mid-May. That marks the first sustained period above 4% in roughly two decades. While forecasting interest rate moves can be challenging, the current yield environment offers fixed-income investors a meaningful opportunity to capture higher income, the primary driver of long-term bond returns, at levels not seen in the era after the financial crisis.

While current spread dynamics are more nuanced, and risk premiums across credit-sensitive sectors remain tight relative to historical norms, all-in yields are still attractive. Investment-grade corporate spreads are approximately 90 basis points over comparable-duration Treasuries, while high-yield spreads are nearly at their tightest in 20 years and sit around 325 basis points over Treasuries. The compression in high-yield spreads signals strong investor demand and a relatively benign near-term default outlook, though it also implies limited room for further spread tightening as a return driver.

The broad high-yield market currently yields more than 7.0%, well below the levels seen during the 2008 crisis but comparable to cyclical peaks in 2012, 2016, and 2020. This represents the potential for equitylike returns with lower volatility and seniority in the capital structure. Of course, high-yield portfolios carry higher credit risk and are more volatile than multisector and core-plus bond offerings, and investors should size their positioning accordingly.

The fixed-income backdrop, while complex, is more constructive than it has been for much of the past decade. Elevated absolute yields support higher income, even as tight credit spreads limit further compression. Investors with longer time horizons may find this environment particularly favorable for locking in healthy yields, while those allocating to higher-risk credit segments weigh high yields with economic uncertainty.

These strategies can provide higher income potential, and each offers an actively managed exchange-traded fund option.

Fidelity Total Bond FTBFX is a reliable intermediate-term core-plus bond strategy that uses its flexibility to manage across investment-grade credit, mortgage-backed securities, and Treasuries. It can include up to 20% of portfolio assets in so-called plus sectors, such as high-yield and emerging-market debt. Ford O’Neil, who is retiring in September 2026, has successfully steered this strategy for more than two decades and has one of the deepest analyst teams in the industry. The portfolio included about 8.7% in below-investment-grade debt as of April 2026, which was more than its typical peer and drove its 4.55% SEC yield about 20 basis points higher than a comparable core-bond passive ETF. This strategy has a Morningstar Medalist Rating of Gold and is available as an active ETF, Fidelity Total Bond FBND, with lower expenses.

JPMorgan Income JMSIX relies on a value-driven approach that favors securitized debt and a healthy dose of below-investment-grade bonds to generate its 5.69% SEC yield, as of April 2026. Multisector bond veteran Andrew Norelli leads this Gold-rated fund that draws on a small army of portfolio managers, sector specialists, and fundamental research analysts to drive positioning for this bottom-up-driven process. The team favors the stable cash flows of mortgage- and asset-backed securities but includes high-yield credit and emerging-market debt to round out the portfolio. It also strives to consistently distribute monthly income. J.P. Morgan offers this strategy as an active ETF, JPMorgan Income JPIE, with a lower expense ratio.

Gold-rated T. Rowe Price Floating Rate PRFRX is a best-in-class bank-loan fund, which comprises non-investment-grade, floating-rate debt. Manager Paul Massaro has been at the helm since 2009 and heads the firm’s high-yield and bank-loan franchise. A seasoned credit research team analyzes corporate fundamentals and assesses the relative value of floating-rate leveraged loans, a feature that keeps interest rate sensitivity low. The fund’s 6.3% SEC yield offers investors higher income, but the lower-grade credit of bank loans can mean larger drawdowns in periods of credit stress. The strategy also offers T. Rowe Price Floating Rate TFLR, with a lower price tag.

Market volatility can also favor actively managed fixed-income strategies, as strong portfolio managers can navigate risk and take advantage of market dislocations. While these strategies typically have higher expense hurdles, a good active manager can offer better long-term value than passive offerings.