Columbia Threadneedle Fixed-Income Monitor: May 2024

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Track fixed-income opportunities with this monthly update.

One way to identify opportunities in fixed income is to look at bond yields. That’s because yield, which is based on a bond's price and coupon payments, reflects total return potential. Yields can change over time and across bond sectors.


Spread, which refers to the difference between a bond’s yield and the yield of a risk-free issue with the same duration (e.g., U.S. Treasuries),1 indicates how much investors are being compensated for taking on additional credit (default) risk. If spreads are above their long-term average (sometimes called "wide " or "cheap"), investors are being paid more to take on credit risk; if they're below their long-term average (called "narrow" or "tight"), investors are being paid less.


Our proprietary Fixed-Income Monitor compares yields and credit spreads over 20 years of history and across fixed income. It’s designed to help investors identify opportunities and risks in the asset class.


Table showing the yield, percentile in yield and spread across fixed income-investments. High yield, municipal bonds and agency mortgage-backed securities offer the highest all-in yields. The credit spread on investment-grade, high-yield and municipal bonds remain below the 50th percentile over the historical range.
Source: Columbia Threadneedle Investments as of April 30, 2024. Yield is represented by yield to worst, which is the minimum return received on a callable bond, apart from the yield if the issuer were to default. For municipal bonds, yield is represented by taxable equivalent yield, which is based on the top federal bracket (37%) and net investment income tax (3.8%). Other taxes are possible. Yield percentile and spread percentile are represented by the range of daily yields and daily spreads, respectively, and both are for the last 20 years, with the current percentile position indicated. Past performance is not a guarantee of future results.

Key takeaways for May 2024

  • Yields moved meaningfully higher as sticky inflation data and the hot labor market pushed out the likelihood of a Fed rate cut in the near term. The benchmark 10-Year U.S. Treasury reversed nearly 75% of its price gains during the fourth quarter rally.


  • Risky assets provided a silver lining in the form of diversification. Credit sectors outperformed duration-matched Treasuries in April thanks to resilient economic data and a constructive start to earnings season.


  • Municipal bonds suffered their worst monthly return since September as prices came under pressure from rising Treasury yields. This pushed after-tax yields back above 6%, an attractive entry point ahead of summer demand from reinvestments.


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