American Century�s Bartolini Talks Rate Hikes, AI, Midterms

American Century’s Bartolini Talks Rate Hikes, AI, Midterms

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ABND

What to make of a fixed income landscape with the Fed raising rates, massive AI debt financing, robust yields, and plenty of volatility potential? While market watchers have plenty of data and analysis to dig into, sometimes it helps to hear directly from asset managers themselves. VettaFi recently spoke with American Century Investments Vice President and Senior Portfolio Manager Steve Bartolini about the latest outlook for rate hikes and yields this October.Key Takeaways: Bartolini anticipates fewer rate hikes than markets anticipate, with almost 100 bps priced in by markets. Mispriced risk areas include asset- and non-agency-backed MBS assets. ETFs like FUSI and ABND can help investors navigate this landscape. Bartolini, who joined the firm in 2024, spoke to the shifting landscape, where he’s seeing downside risk. He also explained how the firm’s strategies are shifting. Higher yields, he noted, offer a strong entry point right now. That includes access via some of the firm’s ETFs, like the American Century Ultrashort Income ETF (FUSI C+), offering yields at almost 6%. Those yields have gone up and appear attractive over the medium term, he said. In the American Century Core Plus Income ETF (ABND), which he himself is directly involved with, the firm has extended duration. Bartolini added that this also applies to some of its other ETFs. He also noted that markets have priced in too many rate hikes for the next year. “We think the Fed path for the rest of ‘26 and into ’27 is at best fairly priced and most likely too aggressively priced,” he said. “So the market now has nearly a hundred basis points, almost four additional rate hikes priced in over the next year and we think that’s far too much.” Ultimately, he anticipates that inflation being calmer than currently perceived will reduce the need for more aggressive Fed rate hikes. As for where risk is mispriced, generally, he spoke to a few key categories.Bond ETF Opportunities: ABND & FUSIFor example, he pointed to the power of multi-sector bond funds like ABND, and within that, areas like securitized credit. This includes shorter duration, higher quality, nonagency MBS debt opportunities. He also pointed to non-traditional asset-backed securities (ABS), particularly fiber to homes in rural areas, rather than data center related. As for downside risks, Bartolini underscored two main themes: midterms and AI. While divided government control generally has limited impact, the midterms elections still carry important implications for U.S.-Iran policy and global market volatility. “Because energy volatility has been a driving force of inflation volatility, but more importantly, a driver of yields basically since the start of the conflict in March,” he said. “And the midterms have been pointed to as a next decision point.” Overall, the firm aims to stay invested with its variety of fixed income ETFs. Bartolini pointed to a positive growth path ahead as a favourable backdrop to find appealing yields. See more: Maximize Yield in Active High Yield Bond ETF AHYB “We think the growth path is solid, may not be as rosy as the market’s pricing, but we still think it’s very solid. We don’t see default risk rising — we don’t see recession on the horizon,” he said. “And so we want to be ready to act when those dislocations present themselves.” For more news, information, and analysis, visit the Core Strategies Content Hub.

American Century’s Bartolini Talks Rate Hikes, AI, Midterms

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