BondBloxx co-founder says now is the time to use precise tools for fixed income

As 10-year Treasury yields hit their highest level since 2011 and the Federal Reserve eyes a possible 75 basis point rate hike, BondBloxx Investment Management co-founder Joanna Gallegos believes that “the time has come for BondBloxx”.

Appearing on CNBC’s “Closing Bell: Overtime” to discuss the company’s current market strategy, Gallegos explained that the company was created after its founders looked at where the markets were in March 2020 and said that they “need to provide better tools for institutional investors to manage their risk through markets like this”, before adding: “So this is the right time for a company like BondBloxx in the products we have on the market.

Launched in October 2021 to provide precision ETF exposures to bond investors, BondBloxx was co-founded by Gallegos with ETF industry leaders Leland Clemons, Tony Kelly, Elya Schwartzman, Mark Miller and Brian O’Donnell. The team has collectively built and launched over 350 ETFs in companies including BlackRock, JPMorgan, State Street, Northern Trust and HSBC.

Gallegos told host Scott Wapner that when she’s spoken to investors, she’s “hearing that investors are reassessing how they incorporate risk into their portfolios through fixed income. So one thing to think about as rates change and markets move, you need more specific exposure to tailor how you want to manage that going forward.

BondBloxx is looking to rapidly expand its range of ETFs. In May, the company launched three new ETFs that track the ratings-specific sub-indices of the ICE BofA US Cash Pay High Yield Constrained Index. These three new products join the suite of seven high-yield, sector-specific ETFs that the high-yield fixed-income ETF issuer launched earlier this year. Additionally, Gallegos said the company has just signed up for eight other Treasury products that allow investors to achieve specific duration targets.

“We see this as just an opportunity to use more precise tools, and that’s what we know is needed,” she added.

As for high-yield fixed income, Gallegos said it “depends on the sector.” Energy, for example, “has had an incredible history over the past six months.” It “just depends on the market you are targeting”.

“Investors … are trying to tailor their long-term exposures, but they also need something that allows them to take out or put in individual risk components of that exposure,” she added.

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