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Treasury yields continuing to push to the upside. You can see there on your screen from Wednesday into the day, the trading day here, following hotter than expected inflation data. We're seeing the 10 year in particular at the highest level in three weeks when it comes to the yield on the 10 year. Markets also pricing in highest inflation since 2023. If you take a look at market pricing when it comes to treasuries here. So how should fixed income investors be approaching the bond market? Here to discuss, we've got Steve Lately, BlackRock Global Co-head of Bond ETFs. Joining us now for this week's ETF report brought to you by Invesco QQQ. Great to have you with us today, Steve. So obviously a lot of volatility when it comes to what we're seeing in the bond market. How should investors be approaching this move to the upside and yields that we're seeing today?

Well, first, thanks for having me. Uh this is something that we've been talking about for quite a while. Um we we have always been saying that the ride on inflation is going to be bumpy. Um it's going to be fairly uneven. We've been advocating for investors to really uh lean more into the income portion of their portfolio, sort of pull back on duration, really uh lean into things like floating rate, um CLOs, bank loans, um, you know, any high income profile really to kind of bank those coupons and then rain in your duration. So when you have volatile days like this, you're you're really more focused on on the coupons you're clipping rather than the price action. And so that's something that we've been been been uh talking about and we've been expecting volatility like this.

Steve, when you take a look at the move higher, is this the start of something that's more of a sustained momentum to the upside?

That is the question, isn't it? Um so the market uh is still pricing in a cut for the year. That's been pushed out um to the back of the year and maybe one more cut for next year. I mean certainly um this caught a number of investors uh off sides. There is a debate about whether, you know, there's some sort of a methodology change, but but no doubt some of the components we're we're certainly uh we're certainly eye catching. So um like anything we'll we'll have to wait and see if uh if, you know, the following data really corroborates this move, but um certainly did catch uh did catch some people by surprise.

Steve, talk to me about what you are anticipating when it comes to the movement that we are seeing in yields and the pressure that that could put on stocks moving forward here. How are you thinking about that, especially as the 10 years remaining above that key 4.6% level today?

Well, I think it's the usual discussion about how how higher yields and term premium in particular um impact valuations on on things like tech. I mean, we're really, you know, focused um on on having investors kind of look past the volatility and really make sure their portfolios are aligned in the right way. And on the fixed income side of things, you know, we've been advocating again for sort of raining in your duration, not shying away from fixed income though. We do think that, you know, yeah, there's yield volatility, you're going to have an uneven ride in inflation, but this is literally a generational opportunity in the bond market. Um yields will go up and they'll go down, but um this is a great time uh to true up the fixed income side of your portfolios. So, you know, we've been looking at things like our flexible income fund, BNK, um in our our CLO funds, uh CLOA and BCLO as a way to really kind of start capturing and monetizing some of this income. Um and we think that's that's the right move. You're you're going to get this volatility, but you got to you got to keep focused and look past it.

All right, Steve. Thanks so much for joining us here this morning.

Thank you.