by Bryan Perry
August 25, 2026
For nearly a decade, income investors were forced into an uncomfortable compromise: either accept micro-yields from safe government bonds or venture far out on the credit risk curve to buy high-yield junk debt. Today, even with rates more normalized, achieving a double-digit yield usually comes with catches, either structural credit exposure in private debt or severe capital erosion from yield-trap equities.
Currently, the bond market is in huge flux, with the fixed-income landscape experiencing a structural shift. The U.S.10-Year Treasury yield recently pushed up near a 20-month high (4.74%), with 30-year yields touching near-20-year highs (5.27%). The cause for higher yields at present is glaringly obvious.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Unprecedented federal debt issuance is flooding the market. Investors are demanding a higher yield to hold long-term debt, driving Treasury and investment grade bond prices down even as short-term policy rates remain on hold. Persistent cost pressures, driven by energy market volatility and runaway spending, have triggered hawkish Federal Reserve signals, including a message of delayed rate cuts.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Hence, traditional fixed-income debt instruments are underperforming, and though the recent inflation data has favored a more bullish bias for future Fed policy, it hasn’t changed the pressure felt on the longer end of the yield curve. Bond vigilantes are working 24/7 to take the 10-year Treasury yield to 5%, which is why Treasury Secretary Scott Bessent tried to support the markets with a $4 billion buyback – a fairly tiny sum compared to the size of the Treasury market and increasingly huge annual budget deficits.
The market trades over $800 billion in debt daily, so a $4 billion repurchase offers just a brief liquidity cushion. Unlike the Federal Reserve, which can create bank reserves out of thin air to buy bonds (as with QE), the Treasury must use the cash it actually holds. That cash comes from tax revenues or issuing new debt, like short-term Treasury bills, and that is why the bond market shrugged off this event a day later.
At the same time, S&P 500 earnings are robust, with targets of 8,000-8,500 emerging from the top Wall Street firms crunching numbers around the clock. So, it would seem these same firms have priced in the implications of bond market volatility, and their assumptions come amid selling in long-dated maturities.
Some High-Yield Alternatives Now
Despite this, a compelling path to high yields exists without relying on conventional fixed-income assets. By building a targeted, two-pillar portfolio of Energy Master Limited Partnerships (MLPs) and active equity option overlay ETFs, investors can generate strong current cash flow with capital-gains potential.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Energy Master Limited Partnerships represent the essential circulatory system of the modern economy. Unlike traditional oil and gas exploration companies exposed to volatile commodity prices, midstream MLPs operate under a toll-booth business model. They own pipelines, storage facilities, and processing plants which collect fixed-fee revenues based on volume rather than energy prices.
The post-2015 balance sheet discipline in the energy sector transformed MLPs into cash-generation powerhouses. Today, major midstream operators carry historically low leverage ratios, generating significant free cash flow after capital expenditures, and funding capital expansion projects internally.
The resulting distributions are not only generous but highly covered by operating cash flows, offering an exceptionally attractive risk-adjusted income yield, along with embedded tax advantages.
To pull the portfolio’s overall yield toward a double-digit yield, active covered call and equity overlay strategies provide a powerful strategy. Rather than relying solely on corporate earnings distributions, these active ETFs buy high-quality equities and indexes, such as the S&P 500 or Nasdaq 100, and write call options against the portfolio or indices to capture implied volatility premiums.
In sideways, modestly bullish, or volatile market environments – like the present market landscape – call option premiums can spike, transforming market volatility directly into spendable monthly income.
While traditional covered call funds capped all equity upside, the modern actively managed overlays dynamically adjust strike prices and hedge positions, allowing investors to participate in structural equity bull runs while harvesting robust, derivative-generated cash flow.
In an environment where short-term interest rates are expected to stabilize or fall, and with inflation running at a 3.4% annual rate, earning income exceeding inflation and tax rates while offering upside appreciation potential means getting more creative with one’s capital committed to income generation.
Against the current market landscape, this combination of asset classes looks to benefit from a rising S&P 500 index and expanding domestic energy infrastructure. Together, investors can craft a 7%-to-8%+ blended yield approaching what the S&P 500 averaged on an annual basis in its historical run.
Going back over a century, to 1916, the long-term annualized nominal return of U.S. large-cap stocks (with dividends reinvested) is roughly 10.4% per year. Technically, the modern S&P 500 index wasn’t officially established until 1957. However, back-tested reconstructions using Robert Shiller’s historical dataset confirm performance consistently circling a 10% nominal benchmark, regardless of the start date.
A portfolio constructed to return 7%-8% a year by way of distributions alone is a compelling proposition in today’s market, where long-term Treasuries are under pressure, demand for energy is rising, and the Kevin Warsh-led Fed is targeting an easier monetary policy. Income investors have tactical choices to stay ahead of inflation and the tax man, and these tools are readily available – not the illiquid high-risk private equity route, but instead, seek liquid assets traded on the NYSE with the click of a mouse.
All content above represents the opinion of Bryan Perry of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Why Data Centers and Memory Stocks Remain Great Buys
Income Mail by Bryan Perry
The Current Blueprint for High Yield Income
Growth Mail by Gary Alexander
The “Gold Vigilantes” Went to War This August
Global Mail by Ivan Martchev
Secretary Bessent’s Act of Desperation
Sector Spotlight by Jason Bodner
Trust the Data, Not Your “Gut” Feelings
View Full Archive
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Bryan Perry
SENIOR DIRECTOR
Bryan Perry is a Senior Director with Navellier Private Client Group, advising and facilitating high net worth investors in the pursuit of their financial goals.
Bryan’s financial services career spanning the past three decades includes over 20-years of wealth management experience with Wall Street firms that include Bear Stearns, Lehman Brothers and Paine Webber, working with both retail and institutional clients. Bryan earned a B.A. in Political Science from Virginia Polytechnic Institute & State University and currently holds a Series 65 license. All content of “Income Mail” represents the opinion of Bryan Perry
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