BlackRock's Rick Rieder said high-yield bonds are an attractive option as investors look for income amid market volatility. Stocks rebounded on Tuesday after suffering sharp losses in the previous session, which sent the S&P 500 and the Dow Jones Industrial Average to their worst performance since 2022. Also rebounded on Tuesday. At the same time, credit spreads on corporate bonds and high-yield bonds, which have been tight, are widening. “The fundamentals for credit are the best I've ever seen, probably in my entire career,” said Reed, the firm's global chief investment officer. “They've paid down their debt and their cash flow coverage is still good. In fact, he said, high-yield credit, also known as junk bonds, is no longer junk. “In terms of credit quality, it's in very good shape, especially on the BB side. A lot of high-yield bonds are being upgraded to investment grade.” Bonds rated BB+ and below by S&P and Fitch and Ba1 by Moody's The bonds are considered high-yield bonds. Rieder also manages the BlackRock Flexible Income ETF, which has about 20% of its portfolio in high-yield credit, its second-largest sector holding. The fund has a 30-day SEC yield of 5.91% and a net expense ratio of 0.40%. BINC YTD mountain BlackRock High Yield ETF He has been reducing some exposure to investment-grade bonds so far this year. “You're going to get a lot of supply at a lower price.” His firm also recently launched the BlackRock High Yield ETF. This actively managed fund has a 30-day SEC return of 6.85% and an expense ratio of 0.45%. Monday's market sell-off was driven by fears of a recession, as well as worries about Friday's disappointing jobs report and questions about whether the Federal Reserve might wait too long to cut interest rates. Rieder believes the Fed should adjust the federal funds rate to 4% to 4.5% as soon as possible. “Do they have to panic and have an internal meeting? No,” he said. However, he added that the central bank should improve its communication about rate cuts. That said, he's not necessarily worried about a recession. “The economy is in good shape,” he said. “I think inflation is slowing and slack is increasing. The decline in inflation is clearly durable, so the Fed should move interest rates to an appropriate level.”