Weekly Market Commentary
April 4, 2016
It’s like déjà vu all over again!
This wasn’t the first quarter, or even the first year, that bond markets have not performed in the way Wall Street strategists have expected.
During 2014, bond yields were expected to rise. They did not.
During 2015, bonds were predicted to finish the year yielding about 2.8 percent to 3.3 percent. On December 31, they were at about 2.3 percent.
During the first quarter of 2016, despite persistent predictions yields would move higher after the Federal Reserve’s rate hike, yields fell and bond values increased. Government bonds delivered the strongest returns gaining 3.7 percent for the quarter, according to Bloomberg.
There is an inverse relationship between interest rates and bond prices. When rates move higher, bond prices move lower, and the value of investors’ holdings may fall. When rates move lower, bond prices move higher, and the value of investors’ holdings may increase.