Fast-Moving Rates
The current combination of relatively high short-term interest rates with an inverted US Treasury yield curve may have investors wondering why their fixed income allocation should comprise anything other than money market funds. But yield curves can change quickly, which means the bonds offering the highest expected returns can as well.
Snapshots of the US Treasury yield curve six months apart illustrate how dynamic the bond market can be. As of September 29, 2022, the curve was especially steep on the short end, with the one-year yield 1.2 percentage points higher than the one-month yield. In contrast, the yield difference between the same points as of March 29, 2023 was down to just 25 basis points.
Judging by market data, it seems investors expect continued volatility in bond markets.1 Fixed income managers with the ability to monitor real-time changes in investment opportunities and dynamically position strategies to take advantage may help investors navigate these volatile markets.
Past performance is not a guarantee of future results.
Footnotes
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1Based on the Merrill Lynch Option Volatility Index, available from FactSet.
Disclosures
All expressions of opinion are subject to change. This information is not meant to constitute investment advice, a recommendation of any securities product or investment strategy (including account type), or an offer of any services or products for sale, nor is it intended to provide a sufficient basis on which to make an investment decision. Investors should consult with a financial professional regarding their individual circumstances before making investment decisions. Diversification neither assures a profit nor guarantees against loss in a declining market.
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