As we started 2016, it looked like the end of the great bond bull market had finally arrived. However, bond prices skyrocketed into the summer with the long Treasury bond ETF peaking over 20%. Then the long drop in Treasury bond prices began, giving up virtually all the gains by the end of the year.
Corporate bonds outperformed governments. The strongest fixed income performance came in junk bonds – they continued to soar despite rising interest rates. As the “Trump Thwack” dropped the fixed income markets by $1 trillion + on the heels of the US Presidential election, the consensus grew that the end of the great bond bull mark has indeed arrived – the ultimate confirmation that the debt growth model is over. Expect investors to maintain a nervous eye on interest rates in 2017.
AGG (US Bond Aggregate), JNK (High Yield Bond ETF)