Asset class | 4Q23 total return (%) |
YTD total return (%) |
YOY total return (%) |
Duration (years) | Yield to worst (%) |
---|---|---|---|---|---|
U.S. Short Term Taxable Fixed Income | 2.71 | 4.65 | 4.65 | 1.90 | 4.58 |
U.S. Intermediate Term Taxable Fixed Income | 6.18 | 5.49 | 5.49 | 5.30 | 4.43 |
U.S. Long Term Taxable Fixed Income | 11.91 | 6.36 | 6.36 | 14.39 | 4.70 |
High Yield Taxable Fixed Income | 7.16 | 13.45 | 13.45 | 3.77 | 7.59 |
Developed Market ex-U.S. Fixed Income | 9.96 | 3.99 | 3.99 | 8.16 | 2.27 |
Emerging Market Fixed Income | 9.26 | 10.45 | 10.45 | 6.92 | 7.21 |
Definitions
Index definitions
Bloomberg U.S. Aggregate 1-3 Year Bond Index is the one to three year component of the Bloomberg U.S. Aggregate Index, which represents fixed-income securities that are SEC-registered, taxable, dollar-denominated, and investment-grade.Bloomberg U.S. Aggregate 5-7 Year Bond Index is composed of the Bloomberg U.S. Government/Credit Index and the Bloomberg U.S. Mortgage-Backed Securities Index, and includes Treasury issues, agency issues, corporate bond issues, and mortgage-backed securities with maturities of 5-7 years.
Bloomberg U.S. Aggregate 10+ Year Bond Index is unmanaged and is composed of the Bloomberg U.S. Government/Credit Index and the Bloomberg U.S. Mortgage-Backed Securities Index, and includes Treasury issues, agency issues, corporate bond issues, and mortgage-backed securities with maturities of 10 years or longer.
Bloomberg U.S. Corporate High Yield Bond Index covers the U.S. dollar-denominated, non-investment grade, fixed-rate, taxable corporate bond market.
JPMorgan GBI Global ex-U.S. Index (Unhedged) in USD is an unmanaged index market representative of the total return performance in U.S. dollars on an unhedged basis of major non-U.S. bond markets.
JPMorgan EMBI Global Index (USD) is a U.S. dollar-denominated, investible, market cap-weighted index representing a broad universe of emerging market sovereign and quasi-sovereign debt.
Sources: Bloomberg and Wells Fargo Investment Institute, as of December 31, 2023. YTD = year to date. YOY = year over year. For illustrative purposes only. Duration is a measure of a bond’s sensitivity to interest rates. Short term taxable = Bloomberg U.S. Aggregate 1–3 Year Bond Index. Intermediate term taxable = Bloomberg U.S. Aggregate 5–7 Year Bond Index. Long term taxable = Bloomberg U.S. Aggregate 10+ Year Bond Index. High Yield taxable = Bloomberg U.S. Corporate High Yield Bond Index. Developed market ex-U.S. = J.P. Morgan GBI Global Ex U.S. Index (Unhedged). Emerging market = J.P. Morgan EMBI Global Index (USD). Yields and returns represent past performance and fluctuate with market conditions. Current performance may be higher or lower than that quoted above. Index returns do not represent investment performance or the results of actual trading. Index returns reflect general market results, assume the reinvestment of dividends and other distributions, and do not reflect deduction for fees, expenses or taxes applicable to an actual investment. An index is unmanaged and not available for direct investment. Past performance is no guarantee of future results. See “Index Definitions and Asset Class Risk Disclosures” link above for index definitions.
Bonds are subject to market, interest rate, price, credit/default, liquidity, inflation and other risks. Prices tend to be inversely affected by changes in interest rates. High-yield fixed-income securities are considered speculative, involve greater risk of default, and tend to be more volatile than investment-grade fixed-income securities. Foreign investing has additional risks including currency, transaction, volatility and political and regulatory uncertainty. These risks are heightened in emerging markets.
Key Takeaways
- Most strategic fixed-income asset classes recovered in the fourth quarter as yields moved lower.
- Yields in both developed and emerging markets also declined in the fourth quarter, as both the dollar and U.S. Treasury yields moved lower amid the expectation for Fed rate cuts in 2024.
- We favor credit selectivity and a diversified income approach across fixed-income asset classes.