Chart of the week

With the 10-year’s decline, a sense of false hope?

The Barclays Agg rose in April for the first time since December. Our chart looks at the secular issues that continue to drag fixed income markets.

April 30, 2021

Barclays Agg return by month and 10-year U.S. Treasury yield

Source: Bloomberg, as of April 29, 2021. Barclays Agg refers to the Bloomberg Barclays U.S. Aggregate Bond Index. 10-year U.S. Treasury yield shows the monthly average for each month except April 2021; April 2021 data is as of April 29, 2021.

  • Rising interest rates wreaked havoc on bond investors in Q1 as the Barclays Agg returned -3.4% and fell each month during the quarter. It was the index’s worst quarterly return in 40 years and highlighted its heightened sensitivity to interest rate changes—the Agg’s duration rose from approximately 5.0 years as of December 2009 to 6.4 years by December 2020.1
  • Following a difficult quarter, however, April has offered bond investors a ray of hope as the return on the Barclays Agg has moved back into positive territory. The index is up 0.69% month to date, while the staggeringly fast pace of the 10-year’s climb during Q1 has subsided considerably.1
  • Despite the improved conditions for bond investors this month, the difficult secular conditions that began to present themselves in 2H 2020, challenging returns on traditional fixed income investments as the broader market rebound took hold, remain firmly in place today.
  • The 10-year U.S. Treasury is currently yielding approximately 1.65%, about 0.75% above where it began the year but still slightly below where it was in December 2019, prior to the pandemic.1
  • Against this backdrop, traditional fixed income portfolios continue to face significant downside risk if rates move higher—a phenomenon that we have already seen play out through much of this year—yet little upside if they decline again.

  • Bloomberg Finance, L.P., as of April 29, 2021.

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