Bond Fund Prices Fall for the Second Straight Quarter

Fixed income funds lost ground for the second consecutive quarter, with a return of minus 0.25% on average for Q2 2018 after retreating 0.56% for Q1. The albatross weighing the asset group down this past quarter was the world income funds macro group, which fell 4.65% on average as the group appeared to have been negatively impacted by a bounce in the strength of the U.S. dollar. The only other macro group in the red for the quarter was investment-grade corporate bond funds (-0.12%), which was hurt by the performance of its longer-term-maturity peer groups. The poor performance from the longer-term-maturity bond funds could be expected, considering the increased interest-rate risk in today’s economic environment, where we are seeing changes to both the level of interest rates (increase) and in the shape (narrowing) of the yield curve. On the plus side of the ledger were the municipal debt funds (+0.88%), government/Treasury funds (+0.31%), and general domestic taxable bond funds (+0.07%) macro groups.

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