As the COVID-19 virus continues to infect the world and the markets, investment-grade bond funds look like a better idea than they have in a while. The benchmark 10-year U.S. Treasury was yielding a historic low of 1.16%, while broad U.S. and global equities were down year-to-date 10.8% (Russell 3000 index) and 7.7%, respectively, as of midmorning Friday.
Equities plummet; do you know where your bond fund is?
The average institutional active bond fund was up 2.5% year-to-date and the average passive bond fund return was up 3.45% as of Thursday's close. Vanguard's long-term bond index fund benefited the most form falling yields, posting an 8.5% return. Prudential's active Total Return Bond fund led active strategies at 3.5%. The largest bond fund by assets, PIMCO's $108 billion Income fund, trailed funds in both groups with a modest 0.62% return. Attribution shows that the fund's exposure to select corporate bonds has offset returns from its government bond portfolio.