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  A Snapshot Of Fixed-Rate Bond Yields & Total Returns
Posted Under: Bond Market
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View from the Observation Deck  
  1. Today's blog post shows investors how traditional fixed-rate bond indices have performed over the past 1-, 3- and 5-years. 
  2. We believe that the information in the chart can help investors establish realistic expectations with respect to fixed-rate bond yields and performance potential moving forward.
  3. There are eight major bond index categories in the chart. Six of them are domestic, one is global in scope and one tracks emerging market bonds.
  4. By matching up the columns via color, investors have the ability to identify those indices that have posted total returns either approaching or exceeding their respective yields.
  5. Interest rates and bond yields have remained at historically low levels since the Federal Reserve lowered the federal funds target rate (upper bound) from 5.25% (9/17/07) to 0.25% (12/16/08). Today, it stands at 1.50%, with the potential for three quarter-point rate hikes in 2018, according to CNBC. 
  6. The yield on the benchmark 10-year Treasury note closed at 2.54% on 1/11/18, well below its average yield of 6.45% for the 50-year period ended 1/11/18, according to Bloomberg. 

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. All of the bond indices in the table are from Bloomberg Barclays. The U.S. Treasury: Intermediate Index includes public obligations of the U.S. Treasury with maturities ranging from 1 to 9.9999 years. The GNMA 30-Year Index covers agency mortgage-backed pass-through securities (both fixed-rate and hybrid ARM) issued by the Government National Mortgage Association (GNMA). The U.S. Municipal Index covers the USD-denominated long-term tax exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds. The U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM Passthroughs), ABS, and CMBS. The U.S. Intermediate Corporate Index is a broad-based benchmark with maturities ranging from 1 to 9.9999 years that measures the investment grade, U.S. dollar-denominated, fixed-rate, taxable corporate bond market. The U.S. Corporate High-Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. The Global Aggregate Index is a flagship measure of global investment grade debt from twenty-three different local currency markets. The Emerging Markets Hard Currency Aggregate Index is a flagship hard currency Emerging Markets debt benchmark that includes USD, EUR, and GBP-denominated debt from sovereign, quasi-sovereign, and corporate EM issuers.

Download a PDF of this post, please click here.
Posted on Friday, January 12, 2018 @ 3:11 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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