What Your Fixed Income Allocation Is Missing

It’s been a raucous past year for fixed income investors. Following years of quiet for rate markets, the Fed’s rapid rate hikes, and subsequent signals about rate cuts, have reinvigorated fixed income investing.

That said, those cuts have yet to materialize. While your average investor may have turned toward investment-grade offerings for their fixed income allocation awaiting those rates, they may want to look elsewhere given the wait.

See more: Long-Term China ETF KBA to Hit Tenth Anniversary

The place they should look may be high yield Asia bonds. Though perhaps surprising to some, Asia high yield investing offers much more reduced interest rate risk and improving credit outlooks.

For example, when looking at the KraneShares Asia-Pacific High-Income Bond ETF (KHYB), investors see how Asia high yield offers lower duration than high yield in other markets. That lower duration offers reduced interest rate sensitivity, which continues to loom over U.S. fixed income. Consider the below graph from KraneShares.

Asia high yield duration

KHYB can provide less rate sensitivity to a fixed income allocation than a U.S. exposure might, per this chart from KraneShares.