Yields surged to kick off September. BlackRock spots solid income in this corner of the market

Treasury yields leapt to start the new month as traders grappled with fears of inflation and the U.S.'s growing debt levels — but there are plenty of opportunities for solid portfolio income, according to BlackRock.

On Wednesday, the 10-year Treasury yield moved above 4.81% for its highest level since November 2023.

Several factors have been contributing to the recent run-up in yields, including surging oil prices and concerns around debt and deficits. "It's not just governments borrowing and spending, but also private companies and public companies looking to fund the AI buildout; we're seeing a reaction in markets to that," said Kristy Akullian, head of iShares investment strategy, Americas at BlackRock.

US10Y YTD mountain The U.S. 10-year Treasury in 2026 The surge in yields has been especially pronounced for long-dated Treasurys. The yield on the 30-year bond was last at 5.269%. Bonds' prices move in opposite directions from their yields.

Long-dated bonds are the most price sensitive to fluctuations in interest rates, which is known as duration. "We have seen these moves higher in the long end, which is why we're relatively cautious about extending duration beyond the belly of the curve," Akullian added, noting that expectations for rate volatility are also now higher.

Selective opportunities Today's higher yields offer a solid starting point for returns in fixed income, but investors will need to be picky about where they take credit risk, according to BlackRock's "Fall Investment Directions" playbook. This approach calls for focusing on investment-grade credit and high-rated speculative grade bonds, the firm said.

"We see opportunities a little bit outside of the core bond allocation," Akullian said, noting that funds like the iShares Flexible Income Active ETF (BINC) can "capture some of those plus-sector opportunities." Those plus sectors – which can include high-yield bonds, bank loans and international fixed income – warrant an active approach.

BINC, which has a 30-day SEC yield of 5.3% and a net expense ratio of 0.4%, has a roughly 18% allocation toward agency residential mortgages, but almost 17% of the portfolio is in non-U.S. credit and 16% in U.S. high-yield credit. The fund also has a duration of 3.56 years.

Along those lines, BlackRock also likes securitized assets and real-asset backed credit, two categories can "offer attractive income with resilient cash flows and lower exposure to AI-driven obsolescence." The firm's iShares Securitized Income Active ETF (SECU) has an SEC yield of 5.49% and an expense ratio of 0.41%. It has a duration of about three years.

Finally, for investors who are guarding their portfolios against inflation and its corrosive effects, Treasury Inflation-Protected Securities are looking especially attractive. The principal of individual TIPS can fluctuate over their term based on inflation. Investors can buy individual TIPS through TreasuryDirect , but ETFs may make sense for those who'd rather buy exposure to a basket of these bonds.

"We view TIPS exposures as providing meaningful income opportunity and a potential cushion against growth deterioration," BlackRock said in its fall playbook. "Despite strong inflows since the start of 2025, positioning in inflation-protected bonds remains relatively light, and we see potential for further inflows through the end of the year and into next," the firm added.