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You Can’t Keep a Good Bond Down

February 2019

A strategic allocation to high-quality bonds may be especially advantageous in uncertain yield environments.


High-quality bond markets haven’t sparked much excitement among investors over the last several years. The 10-year US Treasury yield has hovered at historically low levels, reaching a record low of 1.36% in July 2016 according to Bloomberg Barclays. Slowing global growth, tepid inflation, and several false starts to the Federal Reserve’s (Fed’s) rate-hiking cycle have only added to market malaise. And now, with the Fed well along on a path of hiking interest rates, investor apprehension about bond portfolios is growing, based on the widely held belief that rate hikes mean losses for bond portfolios.

Amar Reganti
Investment Director, Fixed Income
Anand Dharan, CFA
Investment Director, Fixed Income

Investing involves risk, including the possible loss of principal. • Fixed income security risks include credit, liquidity, call, duration, and interest-rate risk. As interest rates rise, bond prices generally fall. • Investments in high-yield (“junk”) bonds involve greater risk of price volatility, illiquidity, and default than higher-rated debt securities. • Foreign investments may be more volatile and less liquid than U.S. investments and are subject to the risk of currency fluctuations and adverse political and economic developments. These risks may be greater for investments in emerging markets. Diversification does not ensure a profit or protect against a loss in a declining market.

 

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