Coronavirus Takes Over, Bond Funds Do Not Escape Unscathed

In a quarter like no other (except maybe for the next one) COVID-19 laid waste to the investment landscape. As the U.S. was forced to shut down a large percentage of its economy to combat the spread of the virus, the damage was widespread. Equity markets quickly entered bear-market territory (a 20% price decline since the recent high), as demand for safe-haven assets increased, the Treasury yield curve rates retreated over 100 basis points (bps) at all maturities, new unemployment claims shattered the old record in back-to-back weeks, and the fixed-income fund universe felt the impact at both the performance and fund-flows levels.

Summary:

• Government/Treasury funds (+2.24%) were led higher by the General U.S. Treasury Funds (+13.45%) and General U.S. Government Funds (+6.78%) groups.
• General domestic taxable fixed income funds retreated 10.57% for the quarter dragged down by the below investment-grade debt peer groups.
• World Fixed Income Funds (-10.55%) were hurt by the emerging markets peer groups, as they hold riskier assets.
• Muni debt funds were off 1.67% for the quarter, as the national muni peer groups (-2.32%) underperformed the single-state muni (-1.03%) classifications.
• Investment-grade corporate bond funds fell 1.26% during Q1. Corporate Debt Funds BBB-Rated suffered the largest loss at -3.24%.

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