JPMorgan's Priya Misra Calls 6.5% Bond Yields a Once-in-a-Generation Opportunity. Her ETF Is Down 5% This Year

Priya Misra, a portfolio manager at J.P. Morgan Asset Management, is pitching high-quality bonds as a once-in-a-generation opportunity. Her argument is that income is back, and investors don't need to reach into junk to get it.

"You can actually take credit risk in the highest quality companies and still get [a] 6.5% [yield]," Misra told CNBC's "ETF Edge" this week. "So, you actually don't have to go down in credit [quality]."

The pitch: yield without the AI bet

Misra tied the call to a specific worry. Many portfolios are heavily exposed to artificial intelligence stocks.

"There's a huge AI exposure," she said. "What fixed income gives you is this diversified set of returns. It's not just an AI trade or a tech trade. You have the Treasury trade. You have credit outside of AI."

Joanna Gallegos, co-founder of BondBloxx, made a similar case in the same interview. She called yields across debt markets "historically attractive" and told investors it is "in the investor's best interest to start looking at the income that's back in fixed income."

Part of her argument is that base rates are high and stable. "The fundamentals of these corporations are so strong, and the economy continues to grow," Gallegos said. She argued that this is "being lost in the narrative around Treasury rates."

The fund behind the call

Misra co-manages the JPMorgan Core Plus Bond Fund ETF (JCPB), which holds almost $16 billion. As of Aug. 31, just over three-quarters of its holdings were rated BBB or higher, according to the firm's website. That leaves less than a quarter outside that bucket.

As of Friday's close, Oct. 9, JCPB was down more than 5% so far this year, according to FactSet. The BondBloxx Private Credit CLO ETF (PCMM) was down 0.6% over the same period.

Misra's own positioning also shows the fund is not sitting only in the top tier. "We've actually been increasing some of the double-B [and] single-B exposure because there has been a widening in high yield spread," she said. She added that the fund likes some investment-grade debt.

In the last few days, she said, the fund started adding duration, "thinking we may be nearing the end of that rate move." Longer duration pays off if rates stop rising and hurts if they keep climbing.

She flagged one specific risk. Higher rates could hurt the housing market, and she said investors must go "bond by bond" to make sure companies are not over-levered.

What JPMorgan's own house view says

The firm's Global Fixed Income Views for the fourth quarter, published Sept. 22 under Bob Michele, its global head of fixed income, currency and commodities, sets the backdrop. It describes loose fiscal policy, strong private-sector balance sheets and oil above $100 a barrel. It says long-dated government bond yields had reached highs not seen in 20 to 30 years.

Michele's team raised its probability of economic expansion to 85% and cut its recession probability to 5%. It expects "a couple of rate hikes from here" from the Federal Reserve, after which the Fed would follow the data.

The outlook says 10-year Treasury yields could retrace to 4.5% to 4.75%, helped by easing geopolitical tensions and a hiking cycle it says is largely priced in.

That is a more measured call than "once in a generation." Michele's team projects "high single-digit returns over the next 12 months" with diligent credit research. Its best ideas are securitized credit, AAA-rated collateralized loan obligations, emerging market debt and currencies, and long government bonds and municipal bonds.

The same document names the risks. One is reaccelerating growth that tightens labor markets and stokes broader inflation. The other is populist pushback against AI.

The note also says the team met a couple of months before the U.S. midterm elections. It says the group believed the administration was focused on finding a resolution, even a partial or temporary one, to the Middle East conflict before then.

A 6.5% yield is a figure for new money buying today. It says nothing about what holders have earned this year. JCPB's more-than-5% year-to-date decline shows how much price damage a rate surge can do to bond funds even when the coupons are attractive.

Buyers at today's yields are betting the damage is mostly done. Misra herself framed the duration add as a view that the rate move may be nearing its end, not as a certainty.

The firm's own outlook still expects more Fed hikes. Whether long-dated yields retrace to the 4.5% to 4.75% range Michele's team lays out, or keep rising with oil above $100, will decide if the call looks prescient or early.