Bond markets, not bond market – mind your fixed income allocations

Not all fixed income investments are made equal. Each year performance is varied across subsectors within fixed income resulting in new opportunities for income and growth across a $123+ trillion global bond market (as of 2020 end). Within each of these indices, there is a divergence among the risk profile and yield of constituents. This became increasingly apparent when comparing overall index yields in 2020 vs 2021- noting the similarities in overall yields but vast differences in the highs and lows of the individual issues.

Sources: Morningstar Direct, July 2021. Past performance is not a guarantee of future results. Investing involves risk, including the possible loss of principal.

US Govt: 10 Year US Treasury Index, US MBS: Bloomberg Barclays US MBS Index, Global USD: Bloomberg Barclays Global Aggregate Ex-USD Index (USD Hedged), US AGG: Bloomberg Barclays US Aggregate Index, Global: Bloomberg Barclays Global Agg Ex USD Unhedged Index, US IG Corp: Bloomberg Barclays US Corporate IG Index, EM Local: JPM GBI-EM Global Diversified Index, EM Hard: JPM EMBI Global Diversified Index, US HY: Bloomberg Barclays US Corporate High Yield Index, Loans: S&P/LSTA Leveraged Loan Index

What this means for investors

Be mindful of your allocations across each area and subsector within fixed income. In a fast moving market, driven by government intervention, resulting in frequent dislocations, paying attention to your allocation within fixed income is just as important as overall portfolio allocations. Active managers and diverse, multisector type funds can help navigate these markets and find opportunities to capitalize on.


Investing involves risk, including the possible loss of principal.

Past performance does not guarantee future results.

Nothing presented should be construed as a recommendation to purchase or sell any security or follow any investment technique or strategy.

The views expressed represent the investment team’s assessment of the market environment as of August 1,2021, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice.

Market risk is the risk that all or a majority of the securities in a certain market – like the stock market or bond market – will decline in value because of factors such as adverse political or economic conditions, future expectations, investor confidence, or heavy institutional selling.

The Bloomberg 10-Year US Treasury Bellwethers Index is composed of public obligations of the US Treasury with a maturity of 10 years.

The Bloomberg US Mortgage-Backed Securities (MBS) Index measures the performance of agency mortgagebacked pass-through securities (both fixed-rate and hybrid adjustable-rate mortgage) issued by the Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Association (Freddie Mac), and Government National Mortgage Association (Ginnie Mae).

The Bloomberg Global Aggregate ex-USD Index (USD Hedged) provides a broad-based measure of global investment grade fixed-rate debt markets, excluding US dollar-denominated securities. The index is hedged to the US dollar against foreign exchange risk by selling each foreign currency forward at the 1-month forward weight.

The Bloomberg US Aggregate Index measures the performance of publicly issued investment grade (Baa3/BBBor better) corporate, US government, mortgage- and asset-backed securities with at least one year to maturity and at least $300 million par amount outstanding.

The Bloomberg Global Aggregate Index ex-USD Unhedged provides a broad-based measure of global investment grade fixed-rate debt markets, excluding US dollar-denominated securities.

The Bloomberg Barclays US Corporate Investment Grade Index is composed of US dollar-denominated, investment grade, SEC-registered corporate bonds issued by industrial, utility, and financial companies. All bonds in the index have at least one year to maturity.

The J.P. Morgan Government Bond Index–Emerging Markets (GBI-EM) Global Diversified tracks local currency government bonds issued by emerging markets, limiting the weights of the index countries by only including a specified portion of those countries’ eligible current face amounts of debt outstanding.

The J.P. Morgan Emerging Markets Bond Index (EMBI) Global Diversified tracks total returns for US dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities, including Brady bonds, loans, and Eurobonds, and limits the weights of the index countries by only including a specified portion of those countries’ eligible current face amounts of debt outstanding.

The Bloomberg US Corporate High-Yield Index is composed of US dollar-denominated, non-investment-grade corporate bonds for which the middle rating among Moody’s Investors Service, Inc., Fitch, Inc., and Standard & Poor’s is Ba1/BB+/BB+ or below.

The S&P/LSTA (Loan Syndications and Trading Association) Leveraged Loan Index is a broad index designed to reflect the market-value-weighted performance of US dollar-denominated institutional leveraged loans.

Charts shown throughout are for illustrative purposes only and not meant to predict actual results.

Chart is for illustrative purposes and is not representative of the performance of any specific investment.

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