Rick Rieder, BlackRock's chief investment officer for global fixed income, stated that investors face a historic opportunity to secure attractive yields in high-quality credit despite current bond market volatility. In an exclusive interview with CNBC, Rieder explained that it is currently possible to construct a diversified portfolio yielding more than 7% with less than three years of duration and an average credit quality of A-. He noted that such yield levels historically appear only during economic or default crises, a condition he said does not apply to the current strong economy where significant defaults are not expected.
Rieder identified investment-grade corporate bonds as his primary area of opportunity, a sector he said he has not highlighted in a long time. Investment-grade bonds are rated AAA through BBB- by S&P and Fitch, and Aaa through Baa3 by Moody's. He specifically pointed to hyperscaler bonds, which have flooded the market as companies ramp up AI infrastructure. According to LSEG data as of Oct. 20, Alphabet, Amazon, Meta Platforms, and Oracle have issued a total of about $228.4 billion in bonds year to date. Rieder described these issuers as having low leverage and tremendous cash flow, making them higher-quality entities that pay attractive yields.
The iShares Flexible Income Active ETF (BINC), managed by Rieder, reflects this shift by increasing its allocation to investment-grade corporates to 14.3% of its portfolio, up from 8.5% in July. The fund carries a 5.66% 30-day SEC yield and a three-year effective duration. By comparison, the iShares Aaa - A Rated Corporate Bond ETF (QLTA) has a 30-day SEC yield of 5.68% but a higher effective duration of 6.48 years.
Rieder advised investors to remain patient, noting that the starting yield is the best barometer for returns if the holding period is a year or longer. He cautioned that rates could still move higher and that selectivity is required outside of investment-grade credit. This includes parts of the data center supply chain that are not hyperscaler-backed, where Rieder said BlackRock has been more cautious.
The broader market context includes concerns over AI-related debt, with junk-rated CoreWeave seeing its stock drop and credit-default spreads widen. Oracle, positioned at the lower end of investment grade, has also experienced pressure. Rieder expects the Federal Reserve to raise its federal funds rate again in December to combat inflation, a move the CME Group FedWatch tool prices at nearly 90% probability. While Rieder does not agree with the hike, he noted that higher rates are already pressuring housing and consumer credit sectors, which rely on floating-rate finance, while having less impact on tech companies' capital expenditures.
Rieder also flagged rising global government debt as a risk. In the United States, the budget deficit has grown to $2 trillion for fiscal 2026. He warned that increasing central bank rates raise the cost of debt for already indebted governments. Additionally, the volume of bond supply from AI companies creates a crowding-out effect that requires monitoring. For now, Rieder said he would continue to reap the rewards of high investment-grade yields.