[TSP_Strategy] Fixed Income Sector Performance

 

Charts of the Week

Fixed Income Sector Performance (Total Return as of 6/30/17)

Chart of the Week for July 28, 2017 - August 3, 2017

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 1 year periods ended June 30, 2017 ("current year") and June 30, 2016 ("prior year"). Positive returns occurred in five of the 11 fixed income sectors for the current year. In contrast, all of the 11 sectors produced positive returns in the prior year.

Sector returns were mixed in the current period as U.S. rates rose across all maturities after three increases in the Federal Funds target rate range. High Yield (12.70%) and Emerging Markets (5.57%) were the best performing sectors in the current year, followed by the three Corporate sectors, Long-Term (3.61%), Investment-Grade (2.28%), and Short-Term (1.43%). Tightening interest rate spreads helped corporate bond returns. Emerging Markets returns were helped by strong global demand for higher yielding securities.

The largest negative returns for the current period were Long-Term Government (-6.96%) and Government (-2.18%) as increasing U.S. government interest rates had a negative impact on returns. Global (-2.18%) also posted negative returns as Japan's economy showed signs of improvement and central banks in the Eurozone indicated that coordinated bond-buying programs may be gradually reduced, which caused yields to rise.

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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