BIT: Better Than A Bond Index Fund, But Still Expensive
2025-05-27 18:23:48 ET
Summary
- Rising yields and inflation risks make U.S. dollar-denominated bonds unattractive, challenging the traditional safe-haven status of bond funds.
- BlackRock Multi-Sector Income Trust offers a high yield and outperforms indices on total return, but lags closed-end peers and has high U.S. dollar exposure.
- Recent market shocks and downgrades highlight heightened risks for bondholders, with leverage amplifying downside in volatile environments.
- The BIT closed-end fund is heavily invested in junk bonds, which may be a better holding than investment-grade bonds as long as the default risk is managed.
- Despite a slight discount to NAV, BIT remains expensive versus peers and recent prices; I recommend waiting for a wider discount before considering an entry.
The BlackRock Multi-Sector Income Trust ( BIT ) is a closed-end fund, or CEF, that aims to provide its shareholders with a very high level of income by investing a variety of different types of bonds and other debt securities from issuers located all over the world. As some readers are well aware, I have been rather hesitant to recommend any bond funds for quite some time now due to the cracks that have started to show in the market. As I stated in a previous article , bond yields have actually been rising despite the Federal Reserve being in the middle of a rate-cutting cycle. For example, on December 31, 2024, the twenty-year U.S. Treasury bond (US20Y) was trading with a 4.86% yield, but today it has risen to 5.03%. We have seen the yields of other long-dated U.S. Treasury securities rise since the start of the year as well:
Bond Term | Yield on Dec. 31, 2024 | Yield on May 23, 2025 |
Ten-Year | 4.58% | 4.51% |
Twenty-Year | 4.86% | 5.03% |
Thirty-Year | 4.78% | 5.04% |
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BIT: Better Than A Bond Index Fund, But Still Expensive
NASDAQ: BIT
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