“The bond market is in shambles,” declared Forbes in the October 13th, 1980 issue of Forbes Magazine. The 10-year Treasury yielded 11.75%, inflation was 12.8% and investors had given up on long-term debt. But a 36-year-old money manager named Bill Gross was buying. He figured bonds could return 25% over the next year. He was early. Yields kept climbing, peaking at 15.84% in September 1981, before beginning a four-decade slide that eventually took them below 1%.

Gross’s prescient market call and four decades as one of the world’s savviest bond investors helped turn the asset manager he cofounded, PIMCO, into a $2.3 trillion fixed income powerhouse. It also made him a billionaire. These days, though, Gross, 82, who focuses mostly on philanthropy, says he wants little to do with bonds. In September, he warned investors to avoid long-term debt, citing mounting borrowing and persistent inflation. Inflation erodes the value of a bond’s fixed payments. And when interest rates rise, older bonds fall in price because investors can get better yields from new ones. The 10-year Treasury now yields about 5%, well above the rates that prevailed for much of the 2010s.

Gross may be right again. Inflation could stick around, rates could continue their climb and bondholders could feel more pain. Jason Stephens, founder and managing partner of Evertern Wealth, which manages $1.6 billion, isn’t as pessimistic as the former bond king. He sees opportunity in investment-grade bonds yielding nearly 6%. He isn’t alone. Nichole Hammond, senior portfolio manager at Angel Oak Capital Advisors, which oversees $24.8 billion in assets, is finding opportunities in energy and specialized finance companies, including aircraft lessors. Those preferences show up in the firm’s $117 million High Yield Opportunities ETF, which owns 9% bonds issued by liquefied natural gas exporter Venture Global and 9.25% notes from aircraft lessor Phoenix Aviation Capital. It also holds 7.875% bonds due 2034 from CVR Energy, an oil refiner controlled by Carl Icahn’s investment empire. Priced at $101.33 today, those bonds have a current yield of 7.49%.

For investors hunting for yield, Hammond emphasizes businesses with steady cash flow and manageable debt. She’s cautious about retailers squeezed by weak consumer demand, heavily indebted homebuilders sensitive to interest rates and some communications and technology companies. Television broadcasters are a particular concern, with declining subscribers and a weak advertising market weighing on the industry. Still, Angel Oak’s ETF owns Gray Media’s 5.375%........

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