[TSP_Strategy] Fixed Income Sector Performance

 

Charts of the Week

Fixed Income Sector Performance (Total Return as of 3/31/17)

Chart of the Week for April 28, 2017 - May 4, 2017

The fixed income market includes many different types of securities, and their performance can vary substantially among these types. The chart above compares the performance of 11 major fixed income sectors for the one-year periods ended March 31, 2017 ("current year"-dark blue bars above) and March 31, 2016 ("prior year"-light blue bars above). Eight of the 11 fixed income sectors produced positive returns for the current year while nine of the 11 sectors rose in the prior year.

The Federal Open Market Committee ("FOMC") of the U.S. Federal Reserve increased the target rate range for the federal funds rate in December 2016 and March 2017, and U.S interest rates were higher across all maturities in the current period compared to the prior period. High Yield led in current year performance (16.39%), rebounding from its negative return of the prior year (-3.69%), as narrowing credit spreads in the sector as well as a recovery in energy prices that helped High Yield issuers in the sector. Emerging Markets was the second best performer (8.58%) in the current year, as shrinking credit spreads spurred by stable global growth benefitted the Emerging Market countries. For U.S. sectors, Corporate returns were all positive but Government returns were generally negative in the current year, as speculation about further FOMC increases had a negative impact on Government returns.

Performance fluctuates over time and returns depend in part on the market environment, which 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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