[video] Quick Take: Best Bonds for 2014? Europe, High Yield and a Barbell
NEW YORK (TheStreet) -- Some investors seem lost on what to do in fixed-income as they anticipate rising interest rates.
Mark Cernicky, managing director at Principal Global Fixed Income, told TheStreet's Gregg Greenberg that even though the 10-year Treasury yield fell after the December nonfarm payrolls disappointed, 10-year bond rates will likely end 2014 in the 3.25% to 3.50% range.
Cernicky suggested investors use what is known as a "barbell strategy," or being on both the short and long end of the yield curve.
Another area he likes is high-yield, CCC-rated corporate bonds. Cernicky said default rates should remain low due to the Federal Reserve's quantitative easing program. The CCC-rated bonds are also less interest rate-sensitive than other levels of credit, such as BB-rated bonds.
Finally, he thinks Europe is another good place to look for fixed-income.Because of new banking regulations in the region, corporations will have to go to the credit markets to help finance business operations. This should create unique investing opportunities going forward, he said. -- Written by Bret Kenwell in Petoskey, Mich. Follow @BretKenwell
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