Bonds have been behaving badly. But the fixed-income market's comeuppance is a good thing for investors looking for better value and more income from their bond funds.
Historically, bonds have offered shelter for portfolios when financial storms touch down on Wall Street. But bonds have not been a haven this year in the grip of surging inflation and fast-rising interest rates. Instead, fixed-income assets ranging from U.S. Treasuries to higher-yielding "junk bonds" have logged double-digit percentage losses resembling declines suffered by more-volatile stocks. "A 10% drawdown in the stock market is common, but it is unprecedented for the bond market," says Lawrence Gillum, a fixed-income strategist at LPL Financial.
The bond market pain meter highlights this year's outsize declines and pokes a hole in the myth that bonds never lose money.
The Bloomberg U.S. Aggregate Bond index, which tracks the investment-grade bond market and serves as the benchmark for most bond funds, has fallen 10.6% so far this year through July 8-putting it on track for its worst annual return ever. (Its worst year up to now was 1994, when it fell 2.92%.) U.S. Treasuries with maturities of 10 years or more have taken an even bigger hit, tumbling 22.5%, according to the Bloomberg U.S. Long Treasury Total Return index. And high-yield junk bonds-those rated BB or lower, with a higher risk of default-have fallen 12.9%.
Bond experts have been surprised by the swift and steep drop in bond prices, causing yields, which move in the opposite direction, to spike sharply higher. "No, it's not normal at all," says Andy McCormick, head of global fixed income at fund company T. Rowe Price.
هذه القصة مأخوذة من طبعة September 2022 من Kiplinger's Personal Finance.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
بالفعل مشترك ? تسجيل الدخول
هذه القصة مأخوذة من طبعة September 2022 من Kiplinger's Personal Finance.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
بالفعل مشترك? تسجيل الدخول
FREE HELP FOR COLLEGEBOUND STUDENTS
This program’s mentors assist applicants as they fill out the FAFSA, write essays and more.
WHAT YOU SHOULD KNOW ABOUT SPOUSAL IRAS
You typically need earned income to contribute to an individual retirement account, but a spousal IRA provides an important exception to this rule.
SELLING SHARES? HERE'S HOW TO MINIMIZE TAXES ON YOUR GAINS
ET'S say you've been regularly buying shares in a booming tech company over the past few years, but now you want to start taking some of those profits, perhaps to rebalance your portfolio.
Strategies for Novice Investors
AS part of a lifes kills program for young, single mothers, I was asked to teach a class on how to get on top of your finances.
ANSWERS TO YOUR 529 PLAN QUESTIONS
Thanks to recent policy changes, families have more options for what to do with money sitting in these tax-advantaged accounts.
Rate-Cut Winners and Losers
NOW that the Federal Reserve has cracked the interest rate ice, the next development will be to separate winners from losers.
SHOULD YOU BUY THESE RED-HOT FUNDS?
Covered-call ETFs are popular but come with plenty of caveats.
DIVIDEND STOCKS ARE READY TO REBOUND
Our favorite dividend payers are poised to benefit as falling interest rates lure investors back.
IS A 55+ COMMUNITY RIGHT FOR YOU?
These age-restricted developments appeal to older adults seeking abundant amenities and an active lifestyle.
AT LONG LAST, RATES ARE DROPPING
Consider these portfolio moves now that the Federal Reserve has cut its benchmark interest rate.