BlackRock expects most fixed-income category returns to fall over time, based on its recently published quarterly capital markets assumptions. It forecasts a 4.7% annualized return over five years and a 20-year return of 3.9% for the broad-based Bloomberg U.S. Aggregate Bond index.
U.S. government bonds with at least 10 years to maturity have expected 10- and 20-year returns of 3.3% and 3.2%, respectively, but the highest projected volatility (13.4%).
U.S. government bonds (10-plus years to maturity) have a 3.3% expected return over the next decade. BlackRock projects a wide band of possible 10-year returns, ranging from 0.3% to 6.5%. At the higher end of the credit risk scale, U.S. high-yield securities have a 6.1% expected return (4% to 8.3%) and emerging markets have a 6% projected return (3.2% to 8.9%).
Examining historical five-year returns, bank loans, measured by the Morningstar/LSTA Leveraged Loan index, had a 4.1% return followed by the Bloomberg U.S. Corporate High Yield index's 3.3%. The Bloomberg U.S. Long Government index (U.S. Treasury and agency securities) produced a -0.9% return.
