In the wake of the worst bond returns in nearly 50 years, rate hikes and persistent inflation continue to challenge returns — making now a good time to rebuild your bond core.
1 Based on intermediate exposures of the Bloomberg Aggregate Index bond sectors, per Bloomberg Finance, L.P., as of 4/25/2023
2 Morningstar LSTA Leveraged Loan Total Return Index has a 0.18 correlation of monthly returns to the Agg. Bloomberg High Yield Index has a 0.43 correlation of monthly returns to the Agg. Bloomberg Emerging Market Local Currency Government Diversified Index has a 0.55 correlation of monthly returns to the Agg. Source: Bloomberg Finance, L.P., 04/30/2018-04/30/2023.
3 Based on the option adjusted spread on the Bloomberg US Corporate Bond Index per Bloomberg Finance, L.P. as of 02/13/2023.
4 Based on the Bloomberg U.S. Strips 25+ Yr Index per Bloomberg Finance, L.P. as of 04/25/2023
5 Based on the weighted average beta of the sectors to the S&P 500 Index from 1/2020 to 4/2023 per Bloomberg Finance, L.P. as of 4/25/2023
Bloomberg US Aggregate Bond Index (the Agg)
A market-weighted index, meaning the securities in the index are weighted according to the market size of each bond type. Most US-traded investment-grade bonds are represented. Municipal bonds and Treasury Inflation-Protected Securities are excluded, due to tax treatment issues. The index includes Treasury, government agency bonds, mortgage-backed bonds, corporate bonds and a small amount of foreign bonds traded in the US.
The difference in yield between a US Treasury bond and a debt security with the same maturity but of lesser quality.
The income produced by an investment, typically calculated as the interest received annually divided by the price of the investment. Yield comes from interest-bearing securities, such as bonds and dividend-paying stocks.
The views expressed in this material are the views of Matthew Bartolini through the period ended 04/25/2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
Past performance is not a reliable indicator of future performance.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates raise, bond prices usually fall); issuer default risk; issuer credit risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.