April Recap: Treasury Yields On the Rise Again

April Recap: Treasury Yields On the Rise Again

April highlights from the fixed income markets:
  • Yields rose across the Treasury curve in April, with the most significant moves coming in the 5- and 10-year portions. Treasury returns were negative across all maturities but T-Bills, which continue to benefit from their low duration and the highest yields on the curve.
  • The Bloomberg U.S. Aggregate Index (the Agg) lost -2.53% in April and underperformed similar-duration Treasuries. Every major sub-sector produced negative absolute returns for the month. Mortgage-backed securities (MBS) were the worst performer relative to Treasuries.
  • Investment grade (IG) corporate bond spreads tightened marginally across all tenors and nearly every sector.
  • High yield (HY) corporate bond spreads were mixed. Sectors moving wider were Communications and Utilities; sectors with tighter spreads were Energy and Basic Industrials.

Read on for more details and analysis.

Market Summary

All major fixed income categories posted negative absolute returns in April, led lower by investment grade corporates.

U.S. Treasury Market

Treasury yields rose across the curve, most notably in the 5-year and 10-year portions. T-Bill yields remain the highest on the curve.

The shortest part of the Treasury curve continues to benefit from higher rates. T-Bills were the only Treasury category to post positive returns in the month. Every other maturity category lost ground.

Broad Investment Grade

The Agg lost over 2.5% and underperformed similar-duration Treasuries. Mortgage-backed securities (MBS) were the weakest component of the Agg versus similar-duration Treasuries.

Spreads on IG corporates continued grinding tighter in April. Current-coupon MBS spreads widened.

All IG ratings categories posted losses in April. Longer duration and higher quality categories performed worse, both in absolute and excess returns.

IG corporate spreads were moderately tighter across all sectors other than Capital Goods, which were unchanged for the month.

High Yield

High yield returns were negative across all ratings categories. Single B and CCC spreads widened, while BB spreads tightened slightly. Only CCCs outperformed similar-duration Treasuries.

Spread moves were mixed across HY sectors. Energy and Basic Industry sector spreads tightened the most, while Communications and Utilities realized the most significant widening.

The high yield default rate dropped slightly in April, remaining low by historical measures.

Municipals & Other

Municipal bond returns were negative for the month. Longer duration underperformed shorter duration muni bonds. Yields moved wider across all ratings and tenors.

Leveraged loans were one of the few fixed income sectors to generate positive returns in April. Global bonds, preferred stocks and convertibles all posted losses.

Learn more about SBH’s Fixed Income Strategies.

This update provides an overview of certain broad-based Fixed Income benchmarks and does not include performance of the Segall Bryant & Hamill Fixed Income styles. Past performance cannot guarantee future results. All investments involve risk, including the possible loss of capital. All opinions expressed in this material are solely the opinions of Segall Bryant & Hamill. You should not treat any opinion expressed as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of the manager’s opinions. The opinions expressed are based upon information the manager considers reliable, but completeness or accuracy is not warranted, and it should not be relied upon as such. Market conditions are subject to change at any time, and no forecast can be guaranteed. Any and all information perceived from this material does not constitute financial, legal, tax or other professional advice and is not intended as a substitute for consultation with a qualified professional. The manager’s statements and opinions are subject to change without notice, and Segall Bryant & Hamill is not under any obligation to update or correct any information provided in this material.

1 Source: Bloomberg.

2 Source: Bank of America Merrill Lynch.

3 Hypothetical yields are calculated as the AA municipal yield divided by (1-tax rate). Actual tax-adjusted yields will depend on individual tax circumstances.

4 Source: Standard & Poor’s.

How Can We Help You?

"*" indicates required fields

Name*
This field is for validation purposes and should be left unchanged.

How Can We Help You?

"*" indicates required fields

Name*
This field is for validation purposes and should be left unchanged.

You are now leaving the SBH main website and entering the SBH Mutual Funds portion. Please note that the SBH main website window will remain open.

How Can We Help You?

We’d love to hear from you and answer any questions you may have about Segall Bryant & Hamill.  You can reach us by submitting this form, by calling (800) 836-4265, or by emailing us at [email protected]. We look forward to hearing from you.

"*" indicates required fields

Name*
What type of investor are you?*
This field is for validation purposes and should be left unchanged.

You are now leaving the SBH main website and entering the SBH Mutual Funds portion. Please note that the SBH main website window will remain open.