Rising yields were one of the main themes last year as bonds entered a bear market. 10-year Treasury yields spiked to 5% in October (a 16-year high), but have since fallen to just above the 4% level. Yields and prices move in opposite directions. But in recent months, many have called for investors to return to bonds as prices are expected to recover soon. Falling yields may lead investors to wonder which corners of the fixed income market continue to offer higher yields, of up to 6%. Brandon Huang, head of fixed income at LGT Private Banking Asia, says 2024 will be the year bonds provide a “reasonable risk-adjusted return amid a normalized yield environment.” “Inflation has fallen in the US and this will allow the Federal Reserve to reduce the policy rate in the middle of this year. We conclude that investment grade bonds are compelling after looking at the historical performance of different asset classes in around rate cuts,” he said. He told CNBC Pro. He urged investors to “lock in returns” right now. “Arguably the returns available now after the repricing in 2022 will not last,” he said. Huang says that if 10-year Treasury yields fall to 3.75%, investment-grade bonds can yield 6% or more over the next 12 months: 5% of coupon income and the remainder of price appreciation as rates fall. He prefers bonds from developed markets – especially those from the United States – to bonds from emerging markets, with a longer duration of more than seven years. Sector-wise, he likes financials, specifically Australian dated Tier 2 subordinated bonds that may be in line for credit rating upgrades. Tier 2 subordinated bonds are repaid upon settlement of senior debt in the event of bankruptcy. Investors can also earn yields above 6% on non-investment grade or emerging market bonds, but Huang “urges caution.” “Investors are arguably not sufficiently compensated for the incremental risk assumed above investment grade bonds,” he said. “If we allocate non-investment grade bonds, we would prefer issuers with improving balance sheets or issuers with commercial operations that are expected to have strong performance,” he added. Remi Olu-Pitan, head of multi-asset growth and income at Schroders, told CNBC Pro that mortgage-backed securities can yield around 5.5% now and “in a 6% range,” citing Fannie Mae and Freddie Mac in the US as examples. of these agencies. These mortgage-backed securities are debt obligations issued by agencies whose cash flows are tied to the interest and payments on a pool of mortgage loans. Agency MBS have low credit risk because they are backed by the U.S. government. If investors are willing to take on more risk, Olu-Pitan says, non-agency MBS are currently yielding between 7% and 7.8%. However, they are not guaranteed by the US government. Below are some mortgage-backed securities exchange-traded funds to consider. Emerging market debt can also offer high yields due to the very high real rates in many of those economies, Olu-Pitan says, and Latin American debt is “easily” offered above 7%. In investment-grade bonds, investors can earn more than 6% in U.S. financial securities, he added. —CNBC’s Michael Bloom contributed to this report.