Long-duration bond strategies once again dominated the list of top-performing fixed-income strategies for the year ended Sept. 30, filling all of the top 10 spots as they did during the 12 months ended June 30, according to Morningstar Inc.'s separate account/collective investment trust database.
Lower rates, a strong U.S. dollar and volatile markets led to long-duration strategies, particularly U.S. Treasuries, doing well for the period.
"This was another quarter of positive returns," said Gabriel Denis, associate analyst, fixed-income strategies at Morningstar in Chicago. "Treasuries did very well this quarter."
Mr. Denis added that the third quarter experienced increased volatility due to a "general anxiety over how the global economy is doing," which led to investors being more cautious. This anxiety — driven by trade war fears, rate cuts from the Federal Open Market Committee and the attack on state-owned Saudi Aramco oil processing facilities on Sept. 14 — led to an increased demand for safe-haven assets, which in turn led to a high demand for Treasuries during the quarter, he said.
Treasury yields also saw significant lows, according to the Morningstar analyst, with the 30-year Treasury bond hitting an all-time low when it reached 2.09% in August. But due to the Fed cutting rates on Sept. 18, Treasury yields went up slightly toward the end of the quarter, bringing returns back down a little bit.
The dollar performed well during the quarter, which, when combined with the demand for safe-haven assets, also increased investor appetite for U.S. Treasuries.
"I wouldn't say there's causation, but anything that had exposure to the long end of the curve did well," Mr. Denis said.