Second-Quarter 2019 Fixed-Income Markets in Review
Uncertainty--around actions by the Federal Reserve, trade tensions, and slower global economic growth--contributed to a tense second quarter in fixed-income markets.
Mixed signals left bond investors to their own interpretations.
The broad Bloomberg Barclays U.S. Aggregate Bond Index generated 3.1%--its highest quarterly return in over seven years--despite signals of slowing economic growth and unpredictable near-term monetary policy actions. In mid-May, the yield curve modestly twitched, as the yield on the 10-year dropped below that on the three-month yield, an event that is widely interpreted as signaling an impending recession. Through June, that yield-curve relationship stayed inverted and fueled expectations that the Federal Reserve would cut rates in the coming months; yet chairman Jerome Powell and his board maintained the 2.25% to 2.5% federal-funds rate at both meetings over the quarter and qualified factors weighing on inflation as merely transitory. Anxieties over a contracting credit cycle underpinned volatility in the corporate-bond markets, as did various tariff threats from the United States aimed at China and Mexico. The corporate-bond Morningstar Category delivered 3.8% from April through June, while the high-yield corporate and bank-loan Morningstar Categories managed positive but far more modest performance than the previous period. The agency mortgage-backed securities portion of the aforementioned index delivered 2.0% for the quarter.
Funds such as Western Asset Core Plus Bond (WACPX), which has a Morningstar Analyst Rating of Gold, that have a longer duration profile and selective credit exposure benefited in this environment. Western Asset Core Plus Bond returned 3.9% relative to the median 3.0% of its distinct intermediate core-plus bond Morningstar Category peers. Mortgage-focused Bronze-rated TCW Total Return Bond (TGLMX) generated 2.8% and lagged that same cohort for the quarter.
Emory Zink does not own (actual or beneficial) 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.