Tale of 2 bond markets
The six-week period between March 1 and April 16 pulled bond funds in different directions based on risk exposures and magnified impact of those risks under stress. Research from Morningstar contrasts the top five performing bond funds over the first half of the period.
During the first half, interest-rate sensitive portfolios, such as those of most intermediate- or total-return bond funds did well relative to those with greater credit exposure. Fidelity Mortgage Securities Fund was king of the hill during the three weeks ended March 23, falling only about 1.2%. Over the subsequent three weeks, the group averaged a 2.95% return, below the 3.57% rebound of the Bloomberg Barclays U.S. Aggregate Bond index.
The next three weeks were the corporate credit show as central banks stepped in to support liquidity via debt purchases. While the top funds posted double-digit returns over the period, they weren't enough to pull the group into the black.
Year-to-date, however, the broad U.S. investment-grade bond index was up about 5% as of April 16, sliding a bit to 4.5% by May 8.