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Fixed Income Funds: Third-Quarter Wrap-Up

Bonds experienced mixed performance over the quarter.

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The third quarter of 2021 was volatile for bonds: July brought strong gains as rates continued to decline, but then rates spiked upwards in late September and much of these gains were washed away as bond prices declined.

As a result, bonds experienced mixed performance over the quarter. The Bloomberg Barclays U.S. Aggregate Bond Index, a proxy for typical U.S. core bond exposure, gained just 5 basis points for the third quarter after gaining 1.8% last quarter. Despite the reversal, two themes from the first and second quarters held. One is the stretch for yield as investors favored more-aggressive sectors, and the second is inflation, as the Consumer Price Index continued to climb, up 5.03% over the last year through September 2021. That led to strong performance for sectors including high-yield bonds and Treasury Inflation-Protected Securities.

Mike Mulach does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.