Falling oil prices, trade wars, tax overhaul and more are among the culprits for fixed-income’s less-than-stellar one-year results.
In the past year, the 20 top-performing bond funds with at least $5 billion in AUM posted an average annual return of less than 3%, according to Morningstar Direct data. For comparison, a similar screen of funds posted an average return of 9.95% in 2017, 13.17% in 2016 and 3.79% in 2015.
The most direct reason for the low figures the past year: multiple interest-rate hikes from the Fed last year — in March, June, September and December — helped flatten the yield curve, says Morningstar senior analyst Emory Zink. Continue reading →
Until recently, investors enjoyed one of the longest bull markets of all time. However, rising volatility in stocks have sent many portfolios through sudden ups and downs, and created uncertainty about the future. Continue reading →
Fixed-income investors have not had to worry about liquidity for a decade. But as volatility surges in the stock and credit markets, liquidity is starting to dry up across segments of the corporate bond markets.
A severe liquidity crisis like 2008, when whole swaths of the credit markets shut down, may be unlikely, but there is concern that the post-financial-crisis bond market could be vulnerable in a period of sustained volatility.
The situation could be particularly acute for BBB-rated bonds, the lowest-rated bonds on the investment-grade spectrum. They now account for nearly half of the $5.8 trillion investment-grade market.
Italian bonds rallied on Wednesday, pushing two-year yields down as much as 23 basis points as markets shrugged off the European Commission’s rejection of Rome’s draft budget and focused on the possibility of compromise between the two sides.
Deputy Prime Minister Matteo Salvini refuted a La Stampa newspaper report that he was open to reviewing the 2019 deficit of 2.4 percent of GDP, but said other aspects of the budget could be discussed.
Prime Minister Giuseppe Conte said he was worried about Italy’s bond spread over Germany and that the government would respond with reforms. Continue reading →
Record number of company credit ratings are on the cusp of ‘fallen angel’ downgrades
As benchmark interest rates in the U.S. rise and the pace of corporate earnings growth slows, Moody’s Investors Service warned Friday that an unprecedented number of corporate credit ratings could be added to the “junk” pile. Continue reading →
Stock-market moves get the most attention, but don’t forget fixed income.
A properly chosen selection of bonds can reduce the overall risk of an investment portfolio over the long term.
The U.S. economy is entering a phase that it hasn’t seen in over 20 years: rising interest rates. The Federal Reserve Bank has raised its interest rate target three times in the last year, most recently at the end of September. Rates are up 2 percentage points in three years, an astronomical increase. Continue reading →
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