There’s still good news for investors looking to make some income. While Treasury yields fell after Wednesday’s lighter-than-expected inflation report, many still are yielding over 4%, or even 5% on higher on shorter-term T-bills. Meanwhile, preferred securities can see yields around 7%. The two-year Treasury was recently yielding around 4.72%, after hitting a 16-year high of 5.12% last week . Yields have been rising since the Federal Reserve began hiking interest rates to tame inflation last year. In 2022, they soared above 4% after starting near 1.5%. Bond yields move inversely to prices. The Fed’s rate hikes also sweetened yields on money market funds and certificates of deposit . The latest inflation data showed year-over-year consumer prices increased 3% in June, the lowest level since March 2021. While traders still expect another rate increase at the Federal Reserve’s next meeting on July 26, market pricing is pointing toward it being the last hike before the central bank pauses for good. “There has never been a better time in the last 15, 20 years for people who want to generate income in their portfolio than right now,” said Tom Graff, head of investments at Facet Wealth. Yet what is the best avenue for someone who is looking to generate the most income on a $10,000 investment — without taking on a lot of risk? There are a few things to consider before deciding to park your money somewhere, including how soon you’ll need access to the cash. With that in mind, here are the top suggestions from experts who spoke with CNBC Pro. T-bills For financial advisor Mitch Goldberg, president of ClientFirst Strategy, T-bills are the place to be if you want to earn the best, safest income. “Nothing that is safe pays a good yield and nothing that pays a good yield is safe, except for T-bills at this time,” he said. Goldberg suggests laddering 3-, 6- and 9-month, as well as one-year, Treasurys. All are yielding over 5%. “If the short-term T-bill yields decline, you’ll be glad about owning some 1-year bills,” he said. “If rates move even higher, you’ll be glad you only have to wait three months for the shortest maturity to mature, so you can reinvest for a higher yield; to roll it over to a new 3-month T-bill.” There is also a bonus for those living in high-tax states — the interest earned on Treasurys is free of state and local taxes, he pointed out. Treasury notes For certified financial planner Ian Weinburg, CEO of Family Wealth & Pension Management, Treasurys between one year and five years look attractive. How far out you go depends on your circumstances, including when you’ll need the money or whether you want to grab higher yields before they start to head lower again, he said. “If they are looking to take advantage of yields that are higher, they may want to go out a little bit,” Weinberg said. “If it is an older investor and they are looking to park money for a few years and collect income, maybe the 2-year.” He suggests going as low as a one-year only if you think you’ll need the money at that time. Certificates of Deposit Yields on certificates of deposit have also moved higher as the Fed raised rates. If you are looking to lock up your money for five years or more, a CD may be the way to go, Weinberg said. “There are some banks and credit unions that are offering CDs that are more than 5%,” he noted. “You need to do some research. They are out there.” Of course, do your homework on the financial institution. Many of Bankrate’s top-ranked five-year CDs yield between 4.3% and 4.5%. By comparison, the 5-year Treasury is currently yielding about 4.1%. Preferred securities Treasurys are one of the best places for safe yields right now, but for a little more risk and a bit more work, investors can earn some great income with preferred securities , said Tim Ghriskey, senior portfolio strategist at investment management firm Ingalls & Snyder. The assets, which have a face value and pay dividends like bonds but trade on exchanges like stocks, have yields that haven’t been seen in years. The ICE BofA Fixed Rate Preferred Securities index, which tracks the performance of fixed-rate preferred securities, has a yield to maturity of 7.1%. “Right now they are pretty attractive, especially floating-rate preferreds and fixed-to-float preferreds with a pretty near time frame for those conversions,” Ghriskey said. “It’s a great sector.” Many preferreds also have qualified dividends, which means holders pay long-term capital gains tax. Bonds are generally subject to tax on ordinary income, which is higher. Ghriskey specifically likes Citigroup Capital XIII preferred shares , which has a fixed-to-floating rate. It is currently yielding 9.44%. ” It is a unique situation. It is currently callable, but it is part of the capital structure of Citigroup,” he said. “It is very unlikely these will be called for a long time.” It is currently priced at around $29, above the $25 face value, so if the asset is called you will be out some capital, he pointed out. Generally, Ghriskey would put two-thirds in Treasurys and one-third in preferreds, but in the case of the specific Citigroup preferred, he’d go 50/50. Corporate investment-grade bonds Facet Wealth’s Graff likes investment-grade corporate bonds. “Right now you can’t do better … than just owning short- to intermediate term high-grade fixed income,” he said. He leans towards the middle of the yield curve at three to seven years. “That is the best balance between locking in some of these relatively high yields that exist today and still earning some of that high current income,” he said. “You are getting paid the most you can possibly get paid per unit of extra risk you are taking,” he added. VCIT YTD mountain Vanguard Intermediate-Term Corporate Bond ETF For investors who want to get in on corporate bonds, he suggests buying a fund. The Vanguard Intermediate-Term Corporate Bond Index Fund ETF , for example, which has a dollar-weighted average maturity of five to 10 years, gets you into that “sweet spot,” he said. The fund, which Graff’s firm owns, has a 30-day SEC yield of 5.43%, as of Tuesday.
