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Uncovering Short-Term Bond Opportunities
Portfolio manager John Mistovich explains how Fidelity Limited Term Bond may provide enhanced yield and diversification benefits to your portfolio with only modest exposure to interest rates.
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Where Our Research Leads Us
Favoring CMBS, CLOs, and high-quality corporate bonds of banks
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- John Mistovich, portfolio manager of Fidelity Limited Term Bond, says a portfolio of short and intermediate-term bonds represents the "goldilocks" (not too short, not too long) part of the yield curve (2.5 to 3 years), offering enhanced yield and diversification benefits with only modest exposure to interest rates.
- With the end of an inverted yield curve and its recent steepening, Mistovich notes that investors are now getting paid − via more attractive yields − to come out of the curve a bit and take on incremental duration risk in owning short and intermediate-term bonds.
- A study looking back at investment-grade bond fund indices in this shorter part of the curve over the past 15 years showed that they generated approximately 88% of the return of the longer-dated core bond funds with approximately 50% less volatility.
- Mistovich says he has been finding attractive investments in the securitized sector – specifically in commercial mortgage-backed securities (CMBS) and collateralized loan obligations (CLOs) − where Fidelity's analysts can conduct deep credit research into the underlying collateral and deal structures.
- Among corporate bonds, the portfolio manager says he has been favoring financials, specifically high-quality banks, given their balance sheets, liquidity profiles, and overall credit fundamentals that are much stronger than during the 2008–2009 Global Financial Crisis.
Fidelity Advisor Limited Term Bond Fund
A fund for income-seeking investors who are concerned about interest rate risk.
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Fidelity Limited Term Bond Fund
A fund for income-seeking investors who are concerned about interest rate risk.
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Fidelity Limited Term Bond ETF
An actively managed ETF for income-seeking investors who are concerned about interest rate risk.
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Views expressed are as of the data indicated, based on the information available at that time, and may change based on the market and other conditions. Unless otherwise noted, the opinions provided are those of the authors and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.