[TSP_Strategy] Fixed Income Sector Performance

 

Charts of the Week

Fixed Income Sector Performance (Total Return as of 6/30/15)

Chart of the Week for July 31, 2015 - August 7, 2015

The fixed income market includes many different types of securities, and performance can vary substantially among these types. The chart above compares the performance of eleven major fixed income sectors for the one year periods ended June 30, 2015 ("current year") and June 30, 2014 ("prior year"). Positive returns occurred across eight of the eleven fixed income sectors for the current year. In contrast, all eleven sectors produced positive returns in the prior year as interest rates generally declined in that period.

The Long-Term Government Bond sector was the best performing sector shown in the current year with a 6.20% return, as investors sought to reduce the risk exposure of their fixed income portfolios and interest rates declined. Municipal (3.00%) and Mortgage-Backed Securities (2.28%) were the second and third best performers. Two strong performers in the prior year, High Yield and Long-Term Corporate, provided negative returns in the current year as investors lowered their risk profile by investing in the less risky assets of government, municipal and mortgage-backed securities. The Global sector was the worst performer (-7.09%) in the current year as economic concerns about Greece and China impacted fixed income returns.

The U.S. Federal Reserve continued to maintain the Federal Funds rate target range near historic lows. The result was returns on both the Short-Term Corporate and Short-Term Government sectors over both periods ranged from approximately 1% to 2.5%.

Performance fluctuates over time and is hard to predict. Changes in both actual and expected interest and inflation rates can materially impact fixed income investments. Also, investors should note that even U.S. Government securities can decline in value and investing in sectors such as High Yield or Emerging Markets involve additional risk.

When making investment decisions, prudent investors should invest based on their own circumstances taking into consideration their goals, investment experience, time horizon, and risk tolerance.

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Posted by: sarah_oz@yahoo.com

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Neither the TSP Strategy group, nor individual members, are licensed or authorized to provide investment advice. Any statements made herein merely reflect the personal opinions of the individual group member. Please make your own investment decisions based upon your personal circumstances.

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