The sharp selloff in fixed-income not only may have gone too far, suggests Andrew Bary, noting a 10-year Treasury yield of 2.33% already discounts plenty of things that may happen in the coming months (or may not happen).
Whether rates are too high or not is up for argument, but what isn't are the discounts to NAV on at least a few closed-end funds.
Those mentioned: Nuveen AMT-Free Quality Municipal Income (NEA +1.5%), BlackRock Municipal 2030 Target Term Trust (BTT +0.9%), BlackRock Taxable Municipal Bond Trust (BBN +1.5%), Nuveen Preferred Income Opportunities (JPC +2.2%).
Also noted is a mutual fund which has sold off: Vanguard Intermediate-Term Tax-Exempt Fund (MUTF:VWIUX).
Another way to play is in preferred stock, with issues from Wells Fargo, Bank of America, and Public Storage all mentioned, or the iShares Preferred Stock ETF (PFF +0.8%).
Emerging markets: iShares Core MSCI Emerging Markets (NYSEARCA:IEMG), SPDR MSCI Emerging Markets Quality Mix (NYSEARCA:QEMM), iShares MSCI Brazil Capped (NYSEARCA:EWZ), EGShares India Infrastructure (NYSEARCA:INXX) "We like India in general as a long-term option," iShares Latin America 40 (NYSEARCA:ILF) "We're starting to see governance improvements in Latin America broadly," iShares J.P. Morgan USD Emerging Markets Bond (NYSEARCA:EMB).
Emerging-market proxies: iShares MSCI Canada (NYSEARCA:EWC) and iShares MSCI Australia (NYSEARCA:EWA).
iShares Core High Dividend ETF (NYSEARCA:HDV). iShares MSCI USA Minimum Volatility (NYSEARCA:USMV) "Now there's more uncertainty, and that's when these low-vol strategies do best."
iShares North American Tech (NYSEARCA:IGM) and iShares U.S. Consumer Services (NYSEARCA:IYC), "We still like consumer services and technology."
PowerShares QQQ (NASDAQ:QQQ), Vanguard Small Cap Value (NYSEARCA:VBR), "Blending the two doesn't tilt the portfolio too much in one direction or the other, because the combination blends small and large, growth and value."
SPDR Barclays High Yield Bond ETF (NYSEARCA:JNK), PowerShares Fundamental High Yield Corporate Bond Portfolio (NYSEARCA:PHB).
VanEck Vectors Fallen Angel High Yield Bond (NYSEARCA:ANGL), "These are viable companies, and although they've moved from investment- grade to high-yield, they're likely survivors."
"We like preferreds, via the iShares U.S. Preferred Stock (NYSEARCA:PFF)." Also: iShares International High Yield Bond ETF (BATS:HYXU).
The Bond King may be battered and bruised a little bit, but his words still cary some weight, with two of his three Barron's Mid-Year Roundtable picks from this weekend posting big gains on heavier-than-usual volume. The thesis: Own some mildly levered closed-end bond funds which can borrow at 10 or 20 basis points, re-lend the money at 400 to 500 basis points, and produce a yield of 7-8%.
One Bill Gross is buying for his own portfolio is the BlackRock Build America Bond Trust (BBN +2.5%). The feds subsidize 35% of the interest paid, the fund usually owns A- and AA-rated long-term bonds, and currently yields 7.5%.
He's also a buyer of the Pimco Dynamic Income Fund (PDI +1.1%), an owner of non-agency mortgages expected to yield between 8-10%. On sale for some time, the fund now trades at about net asset value.
Gross' third pick is an ETF, the iShares U.S. Preferred Stock Fund (PFF +0.1%). Liquid with an expense ratio below 50 bps, the fund primarily holds bank preferreds. It's a short-term play, says Gross, as many of the preferreds in its portfolio will be refunded within a year or to and the dividend will fall. In the meantime, one can collect a 5.5% yield.