Chart: Income is back

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Higher yields could mean more income and less volatility for fixed-income investors.

Since the beginning of 2022, yields have reset at higher levels. For investors, that means significantly more income than what they’ve received in the past. And because price and yield move in opposite directions, it also means these bonds are more affordable relative to recent history.

 

This income component is important because, over the long term, it can drive higher total return for bond investors. Higher income also provides a deeper buffer for market volatility. That buffer will be important to investors since we are expecting ongoing uncertainty while the Fed continues to fight inflation.

 

Bar chart showing a significant increase in starting yields from the end of 2021 to June 30, 2022, across fixed income classes, including Agency mortgage-backed securities, investment-grade corporate bonds, high yield corporate bonds, bank loans and municipal bonds.

 

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