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  How Bonds Have Fared Since 7/8/16
Posted Under: Bond Market
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View from the Observation Deck  
  1. The yield on the benchmark 10-year Treasury note (T-note) closed at an all-time low of 1.36% on 7/8/16, according to data from Bloomberg.
  2. For comparative purposes, its all-time closing high was set on 9/30/81 at 15.84%, while its average yield has been 6.15% from 1/5/62 to 4/26/19. 
  3. From 7/8/16-4/26/19, the yield on the 10-year T-note rose from 1.36% to 2.50%, or an increase of 114 basis points (bps). It closed as high as 3.24% (11/8/18) in the period. 
  4. Since the Federal Reserve ("Fed") began raising rates on 12/16/15, the federal funds target rate (upper bound) has increased from 0.25% to 2.50%, or an increase of 225 bps, according to Bloomberg. 
  5. The cumulative total returns in the chart indicate that bonds issued by corporations, which inherently carry a higher degree of credit risk, have outperformed the other major categories since the yield on the 10-year-T-note began its upward climb from its all-time low on 7/8/16.
  6. Of the various bond indices in the chart, global government debt has had the worst showing since 7/8/16. Deutsche Bank just reported that negative yielding notes and bonds in Europe currently total more than $10 trillion, the highest amount in roughly three years and nearly half of the total deficit amassed by the U.S., according to 24/7 Wall St.  
This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The ICE BofAML U.S. High Yield Constrained Index tracks the performance of U.S. dollar denominated below investment grade corporate debt publicly issued in the U.S. domestic market. The S&P/LSTA U.S. Leveraged Loan Index is a market value-weighted index designed to measure the performance of the U.S. leveraged loan market. The ICE BofAML Emerging Markets Corporate Plus Index tracks the performance of U.S. dollar and euro denominated emerging markets non-sovereign debt publicly issued in the major domestic and eurobond markets. The ICE BofAML Fixed Rate Preferred Securities Index tracks the performance of investment grade fixed rate U.S. dollar denominated preferred securities issued in the U.S. domestic market. The ICE BofAML 1-3 Year U.S. Corporate Index is a subset of the ICE BofAML U.S. Corporate Index including all securities with a remaining term to maturity of less than 3 years. The ICE BofAML 1-3 Year U.S. Treasury Index tracks the performance of U.S. dollar denominated sovereign debt publicly issued by the U.S. government with a remaining term to maturity of less than 3 years. The ICE BofAML 22+ Year U.S. Municipal Securities Index tracks the performance of U.S. dollar denominated investment grade tax-exempt debt publicly issued by U.S. states and territories, and their political subdivisions with a remaining term to maturity greater than or equal to 22 years. The ICE BofAML U.S. Corporate Index tracks the performance of U.S. dollar denominated investment grade corporate debt publicly issued in the U.S. domestic market. The ICE BofAML 7-10 Year Global Government (ex U.S.) Index tracks the performance of publicly issued investment grade sovereign debt denominated in the issuer's own domestic currency with a remaining term to maturity between 7 to 10 years, excluding those denominated in U.S. dollars. The ICE BofAML 7-10 Year U.S. Treasury Index tracks the performance of U.S. dollar denominated sovereign debt publicly issued by the U.S. government with a remaining term to maturity between 7 to 10 years.

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Posted on Tuesday, April 30, 2019 @ 1:28 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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