Blue Haven

Bonds: Equity-like losses followed by equity-like gains?

By July 15, 2023 No Comments

For anyone with bonds, bond etfs, or bond funds in their portfolio in 2022, it was a year to remember. The Bloomberg US Aggregate Bond Index was down a stunning 13% for the year, a number never before seen. For those that continued to hold their bond holdings, 2023 has been more satisfying- so far the same index is up 2.3% in price and yield is approximately 2.8%…a combined total return of over 5% annualized.

For those with preferred etfs (VRP, PFXF, PFFD, etc) in their portfolios, 2023 has been even better. For example, PFXF is up slightly over 4% year to date and the dividend yield is over 6.90%, which is extremely compelling.

PIMCO put out an article last week mentioning that it is possible we will see “equity like returns with less risk” in the bond market. The Fed seems near the end of its tightening schedule and as we see with the bond market, major players are already buying longer maturity bonds in anticipation of rates going lower in the near future.

Hang in there- and remember that bonds are in the portfolio to dampen volatility and provide for cash flow when needed. Yes, prices are still down, but by reinvesting dividend income in some of the preferred etfs, you are buying in at an almost 7% yield.


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