Fixed Income Sector Performance (Total Return as of 9/30/15)
Chart of the Week for October 23, 2015 - October 29, 2015
The fixed income market includes many different types of securities and performance can vary substantially among them. The chart above compares the performance of eleven major fixed income sectors for the one-year periods ended September 30, 2015 ("current year" - dark blue bars above) and September 30, 2014 ("prior year" - light blue bars above). Eight of the eleven fixed income sectors shown produced positive returns for the current year while all eleven sectors produced positive returns in the prior year.
Long-Term Government and Government Bond were the best performing sectors in the current year with returns of 8.62% and 3.68%, respectively. Generally falling rates over the period and investors seeking the perceived safety of government-backed securities helped the returns in those two sectors. Mortgaged-Backed Securities, Municipal, and Investment-Grade Corporate sectors were positive as well with returns of 3.43%, 3.16%, and 1.66%, respectively. The three sectors with negative returns in the current year were Emerging Markets (-1.43%), Global (-3.26%), and High Yield (-3.43%). Those three sectors were impacted by concerns over economic developments in China (Emerging Markets and Global), and the impact of falling energy prices on energy companies (High Yield) in the current year.
The Short-Term sector had positive returns in both periods for both government and corporate securities as the Federal Reserve Board's (Fed) policy has been to keep short-term rates low. Further, the Fed decided not to increase the Fed Funds target rate range in current year.
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.
Posted by: sarah_oz@yahoo.com
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