Bonds – The Dual Benefit

The excitement for fixed income professionals over the last year plus, has been the delivery of dual benefits for investors. A more conservative investment portfolio allocation dictates both growth assets (such as stocks) and wealth preservation assets (such as fixed income) regardless of whether the interest rate environment offers 1% or 10% returns. The enthusiasm around purchasing fixed income in today’s environment is that it, as expected, provides wealth preservation and in addition, it is providing higher yields that are hitting many investors cash flow demands. Rather than ramble on about the prospects of implementing or timing fixed income allocations, a simple chart and graph express the opportunity for all investors.

The chart uses the Bloomberg BBB corporate index as a market gauge. A 5-year BBB corporate bond can be purchased at around a 5.36% yield, which is a higher yield than could have been achieved for 94% of the last 15 years. Today’s 10-year BBB 5.83% corporate yield is higher than it was for 97% of the last 15 years.

BBB corporate bonds