Market Minute - March 9, 2018

by Scott Rosenquist, CFA


The low interest rate environment over the past several years has changed the broad bond index that I discussed last month (Bloomberg Barclays U.S. Aggregate).  The interest rate sensitivity has increased to levels that investors may not be aware of.  This is highlighted in the chart below from J.P. Morgan’s Guide to the Markets.

Duration of the Barclays U.S. Aggregate.png


As you can see, the duration level has increased well above its average.  The higher duration means the Index is more sensitive to interest rates at a time when most signs are pointing to higher rates.  This was a topic in the markets last week as the new Federal Reserve Chairman Jerome Powell gave his semiannual report to Congress.

While fixed income plays a role in most portfolios for diversification and income needs, it is important to be selective with sector exposure within the bond market given the current market environment.  The broad index does not fully reflect all of the opportunities available to investors.  Investors may be able to find better risk adjusted returns by expanding beyond the traditional index towards other areas of the fixed income market not represented in the Bloomberg Barclays Aggregate Bond Index.  Be sure to contact your Relationship Manager to discuss this topic or your accounts in general.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendation for any individual. Although general strategies are revealed, this post is not intended nor does it reflect transactions within any one account. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All data and information is gathered from accurate sources but is not warranted to be correct, complete or accurate. Investments carry risk of loss including loss of principal.  Past performance is never a guarantee of future results.

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