Any suggestions on this as I only need 6%?
I wouldn't want to be in it with rates rising, QE stopping, and the economy improving.
Almost no fixed income investments will suit this view (except perhaps very distressed or very short dated securities).
If you’re looking for something low risk in the 6% area, I like securities like ticker ELB which is first lien mortgage paper on Entergy. If you purchase @ $24, you’re looking at a 6.3% current yield. I’ll take this secured paper in an investment grade utility over some junior bank preferreds all day. Note that this is a 27yr bond, so you have substantial interest rate exposure and the price will likely decline if rates rise further. It’s also callable in a few years, muddling the convexity picture a bit.
If you want some good carry paper, I like a something like PJA which is a trust of a Qwest Capital bonds that yields about 8%. 5yr credit default swaps on QUS Cap are trading around 150bps, so this is a pretty low risk credit. The catch is that it’s callable at the current price, so your principal upside is minimal. You can also take a look at trusts like JZV (10yr CNA paper), PJL (17yr Verizon paper), and KTN (13yr AON paper) which are similar. These are nice in a retirement account, where you can clip that 8% tax free.
Want to make a contrarian play? A lot of bond closed-end funds (CEFs) have taken a vicious pounding, trading at double digit discounts to net asset value (NAV), the worst they’ve seen since the financial crisis. Unlike buying stocks when they fall, this is truly buying assets at a discount (to the tune of 10-15% cheap to the underlying assets). On a fair value basis, many are 2-3 standard deviations cheap. If and when the asset class normalizes, you’ll have a very fair wind at your back. Many yield well north of 7% and contain predominantly investment grade assets. Though, at the moment you’re catching a falling knife. Expect to quickly be either a hero or a zero. I think funds like ERC, BTZ, GDO, NPI, CSI, SGL, BKT, and PIM are worth taking a look at. My general criteria are greater than 11% discount to NAV, greater than 2.4 standard deviations cheap to historical NAV deviation, and a sub 1% management fee.