Can Solid Intermediate-Term Bond Fund Performance Continue?
The category held up well in 2017 despite increasing interest rates, but investors should temper their expectations for 2018.
Sarah Bush: Despite three Federal Reserve rate hikes during the course of 2017, investors in the intermediate-term bond category have fared relatively well so far this year. Funds in the group, which are home to many so-called core funds, were up 3.8% on average through Dec. 15, slightly above the 3.6% gain for the widely followed Bloomberg Barclays US Aggregate Bond Index.
Several factors contributed to that solid if not outstanding performance. For starters, even as the Fed rate hikes drove increases in short-term bond yields, yields on long-term bonds have actually come down modestly since the beginning of the year. Meanwhile, credit has enjoyed a particularly run, with investment-grade corporates handily outpacing the broad Bloomberg Barclays Agg. Junk bonds, which carry even more credit risk, did even better. As a result, funds with corporate-heavy mandates and a willingness to hold lower quality bonds, like Loomis Sayles Investment Grade Bond, have fared particularly well. That fund and others, including Western Asset Core Plus Bond, also benefited from strong performance in emerging-markets debt and currencies.
Sarah Bush does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.