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Bond prices begin to climb amid equity market volatility

Oweaker economic data could once again push investors back into the safe limits of the bond markets. As such, yields on benchmark Treasuries are rising amid stock market volatility, potentially signaling a bond market comeback.

A CNBC report recently noted that the May reading of the S&P Global US Flash Manufacturing PMI was 57.5, which was only slightly higher than the Dow Jones forecast of 57.4. Additionally, the S&P Global US Flash Services PMI came in at 53.5, which was below a consensus forecast of 55.

“Manufacturers and service providers reported a weaker recovery in production amid elevated inflationary pressures, further deterioration in supplier delivery times and weaker demand growth,” said S&P Global. mentioned in one version.

Recently, talk of a recession amid rising consumer prices and rising rates could contribute to the slow growth forecast. As mentioned, stock market volatility is only adding to investors’ wall of worry, making bonds a potentially ideal option to consider once again after a tough time so far in 2022.

2 options for gaining exposure to bonds

Investors who are ready to return to the bond market have options with exchange-traded funds (ETFs). Unlike building a bond portfolio using individual debt issues, ETFs can provide broad exposure depending on an investor’s specific scenario with respect to investment objectives.

To gain global exposure to the bond markets, investors may consider Vanguard Total Bond Market Index Fund ETF Equity (BND). BND, which has a low expense ratio of 0.03%, offers bond investors a comprehensive and all-encompassing solution to gain exposure to US bonds. It can be an ideal solution for investors looking to supplement their equity exposure.

For exposure to corporate bonds, in order to obtain more yield (but with more credit risk), investors can opt for the Vanguard Total Corporate Bond ETF Equity ETF (VTC). The fund seeks to track the performance of a broad market-weighted corporate bond index.

The fund is a fund-of-funds and uses an index-based investment approach designed to track the performance of the Bloomberg US Corporate Bond Index, which measures the market for high-quality fixed rate taxable corporate bonds. The fund also has a low expense ratio of 0.04%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.