Schwab Places High-Yield Corporates, REITs, TIPS Top Income Ideas for 2026
1h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
income-investinghigh-yield-bondsreits
Fazen Markets Editorial Desk
Collective editorial team · methodology
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Collin Martin, a fixed income strategist at the Schwab Center for Financial Research, outlined Schwab's top three income-generating asset classes for the remainder of 2026 in a report published on June 24. The recommendations focus on specific sectors within the fixed income and real estate investment trust markets where Martin sees the most attractive risk-adjusted yields. His analysis arrives as investors manage a shifting rate environment where traditional bond strategies face renewed scrutiny. Live market data as of 19:48 UTC today shows Schwab's own stock (SCHW) trading at $91.61, down 0.46% on the day.
The search for portfolio income has intensified as the Federal Reserve's hiking cycle concluded over a year ago, leaving yields at multi-year highs. The S&P 500 currently yields around 1.4%, while money market funds offer yields near 4.5%, creating a yield competition between stocks and cash. This backdrop forces income investors to be more selective, moving beyond generic duration plays. Martin's top picks reflect a hunt for sectors where yield premiums remain unusually wide due to specific, potentially misplaced fears.
A historical precedent for this type of sector-focused income strategy emerged in late 2015. Following a period of market volatility and concerns over energy sector defaults, high-yield corporate bond spreads widened dramatically, eventually offering outsized returns for investors who entered before the 2016 recovery. The current environment shares similarities, with specific sectors like commercial real estate facing headwinds that may be overly priced into the market.
The catalyst for revisiting these income ideas now is the perceived stabilization of the macro outlook. Inflation has receded from its peak, allowing the Fed to hold rates steady. While the timing of the first cut remains uncertain, the absence of further hikes provides a floor for fixed income valuations. This allows investors to assess credit and sector risks without the added volatility of a rapidly moving rate backdrop.
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) currently offers a 30-day SEC yield of approximately sitefinity. The ICE BofA US High Yield Index effective yield trades around 7.8%, representing a spread of roughly 320 basis points over comparable Treasury notes. This spread is above the five-year average of ~300 basis points, suggesting a persistent risk premium.
In the REIT space, the FTSE Nareit All Equity REITs Index yields about 3.9% as of June 24. However, certain subsectors like regional malls and office REITs show yields exceeding 6%, reflecting deep-seated market concerns. For comparison, the Schwab U.S. TIPS ETF (SCHP) has a real yield near 2.0%, a level not seen consistently since before the 2008 financial crisis. This yield compensates investors for future inflation protection.
| Asset Class | Key Metric | Comparison vs. Recent History |
|---|---|---|
| High-Yield Corporates | Spread: ~320 bps | Wider than 5-yr avg of ~300 bps |
| Equity REITs | Index Yield: ~3.9% | Office subsector yield >6% |
| TIPS | Real Yield: ~2.0% | Highest sustained level since 2007-2008 |
Schwab stock itself, trading at $91.61, is down 0.46% on the day within a range of $91.02 to $92.89. This price action is broadly in line with the financial sector, which has faced pressure from a flattening yield curve.
Martin's focus on high-yield corporates signals a view that default fears, particularly for companies rated BB and B, are overstated. This stance directly benefits ETFs like HYG and JNK, as well as active managers specializing in lower-quality credit. A sustained appetite for this paper could compress spreads by 20-30 basis points, generating capital gains on top of the coupon income. The office REIT recommendation is more nuanced, targeting companies with strong balance sheets and manageable near-term lease expirations. This could create a bifurcated market where well-capitalized office landlords like Boston Properties (BXP) outperform their more leveraged peers.
A key counter-argument is that a sharper-than-expected economic slowdown would immediately pressure the high-yield market and exacerbate vacancies in commercial real estate. In such a scenario, the yield premium may prove inadequate, leading to capital losses that erase income benefits. For TIPS, the risk is that inflation falls faster than expected, making the real yield less attractive relative to nominal Treasuries.
Positioning data indicates institutional investors have been slow to re-enter the office REIT sector, with short interest remaining elevated. Flow of funds into high-yield bond funds has been positive but tepid, suggesting many are waiting for clearer economic signals. The TIPS market has seen steady demand from pension funds and insurers locking in long-term real yields.
The primary catalyst for these income ideas will be the July 31 Federal Open Market Committee statement and subsequent press conference. Any shift in the Fed's dot plot towards earlier or deeper cuts would likely benefit high-yield and REITs most, as lower risk-free rates boost their relative appeal. Conversely, a hawkish tilt would support TIPS by anchoring real yields.
For high-yield, investors should monitor the ICE BofA High Yield Index Option-Adjusted Spread. A sustained break below 300 basis points would confirm a bullish technical shift and validate Martin's call. In REITs, the next round of quarterly earnings in late July will provide critical data on leasing velocity and tenant retention, especially for office-focused names.
Key levels for the 10-year Treasury real yield, as tracked by TIPS, are 1.8% and 2.2%. A move below 1.8% suggests market pricing for weaker growth, while a hold above 2.2% indicates persistent inflation expectations, both of which influence the attractiveness of new TIPS purchases.
A REIT's dividend yield is not guaranteed and is funded by the company's Funds from Operations, which can fluctuate based on property occupancy, rental rates, and operating costs. A bond's coupon is a contractual obligation, and failure to pay constitutes a default. REIT dividends may also contain a return of capital, which has different tax implications than bond interest income taxed as ordinary income.
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