• The Fed’s quick and decisive actions as the COVID-19 crisis emerged in the U.S. helped provide critical support to major risk markets. The S&P 500 is up nearly 18% quarter to date while high yield bonds climbed more than 8%.1     
  • Over the same time frame, however, the Barclays Agg, typically used to measure the performance of traditional bonds, has risen a much more modest 2%.And unlike last year, when traditional bonds benefited from a 120 bps decline in interest rates, the Agg’s return prospects seem significantly cloudier today as the 10-year U.S. Treasury yield has very little room to fall further.
  • The chart shows the YTD movements of the Barclays Agg and 10-year U.S. Treasury yield (shown in an inverted scale). As it highlights, the Agg has been stuck in a tight trading range with the 10-year U.S. Treasury yield over approximately the past six weeks.
  • In fact, with the 10-year having essentially flatlined near zero, traditional fixed income offers little in the way of income while even small increases in rates could have a negative impact on returns.
  • Traditional fixed income investments have served investors well over the past several years. Looking ahead, however, investors may need to turn elsewhere to find investments that offer competitive income or healthy total return potential amid an economic recovery.

1 High yield bonds are represented by the ICE BofAML High Yield Master II Index. Data is as of May 28, 2020.
2 Barclays Agg refers to the Bloomberg Barclays U.S. Aggregate Bond Index.


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