Rick Rieder Favors Investment-Grade Bonds for Fourth-Quarter Yields

BlackRock fixed-income chief Rick Rieder favors investment-grade corporate bonds for the fourth quarter, arguing that their yields can pair with stronger borrower finances as cloud companies fund artificial intelligence infrastructure.

His hypothetical example is a diversified fixed-income portfolio yielding more than 7%, with duration below three years and an average A− credit rating. Rieder did not identify its holdings or name a fund matching all three characteristics.

The iShares Flexible Income Active ETF (BINC) had a 5.66% 30-day SEC yield and 2.99 years of effective duration as of Oct. 15. Its debt spans high-yield, emerging-market and securitized assets, as well as investment-grade credit. The iShares Aaa - A Rated Corporate Bond ETF (QLTA), which tracks U.S.-dollar investment-grade corporate bonds rated Aaa to A, had a 5.65% 30-day SEC yield and 6.46 years of effective duration that day.

Duration measures how sensitive a bond’s price is to interest-rate changes. Shorter duration generally means less rate sensitivity, though it does not eliminate credit or other risks. An A− average rating falls within the investment-grade range of BBB− to AAA. BINC and QLTA show different combinations of yield and duration; neither is identified as the portfolio in Rieder’s example.

Rieder’s case for corporate bonds centers partly on large cloud-computing companies financing AI infrastructure. He described those companies as having low leverage and substantial cash flow. “They’re very low leverage. They have tremendous amounts of cash flow coming in,” he said.

Refinancing risk remains meaningful in some parts of the fixed-income market. Rieder and Tom Parker wrote, “Income may be abundant, but it is not interchangeable; similar yields can carry very different risks.”