Bloomberg US Aggregate Bond Index is composed of securities from the Bloomberg Government/Credit Bond Index, Mortgage-Backed Securities Index, Asset-Backed Securities Index, and Commercial Mortgage-Backed Securities Index.
Bloomberg US Government/Credit 1-3 Year Index is an unmanaged index comprised of the U.S. Government/Credit component of the U.S. Aggregate Index.
ICE BofA US 3-Month Treasury Bill Index is comprised of a single issue purchased at the beginning of the month and held for a full month. At the end of the month that issue is sold and rolled into a newly selected issue.
1 Duration is a measure of the sensitivity of an investment’s price to nominal interest-rate movement.
2 Bond discount is the amount by which the market price of a bond is lower than its principal amount due at maturity. A bond issued at a discount has its market price below the face value, creating a capital appreciation upon maturity since the higher face value is paid when the bond matures.
3 The Federal Reserve’s dot plot is a chart updated quarterly that records each Fed official’s projection for the central bank’s key short-term interest rate, the federal funds rate. The dots reflect what each US central banker thinks will be the appropriate midpoint of the federal funds rate at the end of each calendar year.
4 The federal funds rate is the target interest rate set by the Federal Open Market Committee. This target is the rate at which commercial banks borrow and lend their excess reserves to each other overnight.
5 Federal Reserve Summary of Economic Projections, 9/30/23.
6 A basis point (bps) is a unit that is equal to 1/100th of 1% and is used to denote the change in a financial instrument. The basis point is commonly used for calculating changes in interest rates, equity indices and the yield of a fixed-income security.
7 Bloomberg US Aggregate Bond Index (also known as the Agg) is composed of securities from the Bloomberg Government/Credit Bond Index, Mortgage-Backed Securities Index, Asset-Backed Securities Index, and Commercial Mortgage-Backed Securities Index.
8 Yield to worst is a measure of the lowest possible yield that can be received on a bond that fully operates within the terms of its contract without defaulting.
9 In finance, accretion refers to the accumulation of the additional income an investor expects to receive after purchasing a bond at a discount and holding it until maturity. Par is the face value of a bond, which defines its maturity value and the dollar value of coupon payments.
10 Investment-grade (IG) bonds are believed to have a lower risk of default and receive higher ratings by the credit rating agencies, namely bonds rated Baa (by Moody’s) or BBB (by S&P and Fitch) or above. These bonds tend to be issued at lower yields than less creditworthy bonds.
Important Risks: Investing involves risk, including the possible loss of principal. • Fixed-income security risks include credit, liquidity, call, duration, event and interest-rate risk. As interest rates rise, bond prices generally fall. • Foreign investments may be more volatile and less liquid than US investments and are subject to the risk of currency fluctuations and adverse political, economic and regulatory developments. These risks may be greater, and include additional risks, for investments in emerging markets. • Municipal securities may be adversely impacted by state/local, political, economic, or market conditions. Although municipal securities are exempt from federal income taxes, investors may be subject to the federal Alternative Minimum Tax as well as state and local income taxes. Capital gains, if any, are taxable. • Mortgage-related and asset-backed securities’ risks include credit, interest-rate, prepayment, and extension risk. • Diversification does not ensure a profit or protect against a loss in a declining market.
The views expressed here are those of the author. They should not be construed as investment advice. This material and/or its contents are current as of the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Hartford Funds.