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Flawed Bonds? Try Autocallables for Reimagined Income
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The US bond market is the largest in the world, making up 40% of the global total with $58 trillion in debt issued as of 2025.1
Bonds are units of debt issued by companies or governments to raise funding. They are essentially an IOU. Government bonds are used to fund public services like schools and roads or to fund emergencies like natural disasters or war. Bonds are viewed by investors as fixed-income instruments because most of them pay a fixed rate.
Bonds are usually included in investment portfolios as a way to reduce risk and/or provide stable income. The traditional 60/40 retirement model consists of 60% stocks and 40% bonds. It is designed to mitigate risk whereby stocks and bonds seesaw valuations, and to provide some level of stable income to replace pre-retirement income and supplement other sources of retirement income like social security.
But bonds can be flawed. Yields have been declining and correlation with stocks has been increasing. Both patterns erode the power of the bond to provide income and mitigate risk.
Treasury yields have trended downward for more than 4 decades and have not surpassed 6% this century. Over the past decade, treasury yields have barely kept up with, or even lagged, inflation. This pattern has been especially true lately, as inflation reached a post-pandemic spike of 8% in 2022 while 10-year treasury yields remained below 5%.
Inflation doesn’t just increase bond prices, it increases the correlation between bonds and stocks, which means that stocks and bonds behave similarly. Until very recently, correlation between stocks and bonds turned from negative to positive and stayed that way for a sustained period. This pattern of higher correlation erodes the intended risk reduction of including bonds in an investment portfolio.
Bonds, therefore, may not reliably reduce risk in a traditional 60/40 portfolio anymore, nor do they provide high levels of fixed income.
Investors today are seeking reliable income streams that go beyond bonds. There is growing demand for strategies that seek to offer above-average yield while managing risk and maintaining diversification.
Autocallables in an ETF format are an emerging alternative to bonds that can smooth cash flow, lower concentration risk, and provide more predictable income. Autocallables can help investors maintain their lifestyle and portfolio stability even when markets are volatile.
TrueShares S&P Autocallable High Income (PAYH) and S&P Autocallable Defensive Income (PAYM) ETFs bring one of the most popular income strategies—the autocallable note—into the ETF wrapper. Designed for investors seeking moderate (PAYM) to high (PAYH) stable monthly income, these new equity-linked instruments embed contingent downside protection and perpetual hedging. The result: a model-ready, single-ticker solution that seeks to provide consistent income, manage risk, and reduce mark-to-market volatility compared to traditional structured products or peers in the ETF space.
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