Charting our Focus

 Bonds are Back

Patient fixed income investors historically have been rewarded following years of bond market underperformance

2022 was the worst calendar year performance of the US bond market in over 45 years¹.  US fixed income markets, however, have proven to be resilient following such down markets. Notably, in eight of the nine calendar years since 1975, each of the years of weakest total returns were followed by a year of solidly positive total returns, as the chart on the left illustrates.

The US Federal Reserve has taken an unprecedented hawkish stance on monetary policy since March 2022, increasing the federal funds rate by a total of 475 basis points in just one year - in an effort to bring down inflation. Capital markets appear to have priced in the conclusion of this aggressive tightening cycle, and imply several rate cuts on the horizon. Fixed income investors seem to have recognized this development, as the Bloomberg US Aggregate Index returned +2.96% in the first quarter of 2023. 

• Valuations and income opportunities in US fixed income remain at attractive levels for investors looking for an entry point.  The Bloomberg US Aggregate Bond Index average price on 3/31/23 was $91.09 vs $104.58 on 12/31/21. And the yield-to-worst on 3/31/23 was 4.40% compared to 1.77% on 12/31/21.

• The right chart shows the worst 1^st quarter starts to the bond market since 1975, followed by the remaining 9 months’ performance. In 8 of the 9 most negative starts, the bond market achieved positive total returns for the remainder. (2023 does not appear.)

Fixed income investors who remained fully invested after a downturn in the US fixed income markets have generally been rewarded for their patience in a relatively short time.  Rather than realizing a potential loss and reducing portfolio diversification², fixed income investors may be better served by earning higher yields while waiting for the market to recover from a drawdown.

¹Source: Bloomberg. Returns of the Bloomberg US Aggregate Bond Index.
²Diversification does not assure a profit or protect against loss.

Past performance is no guarantee of future results.

Terms and Indices

Price/earnings ratio, or PE: is a valuation measure of expensiveness using a stock’s price divided its by per-share earnings. Forward PE represents analyst consensus estimates of that measure over the next 12 months.

Yield-to-worst: A measure of the lowest possible yield that can be received on a bond that fully operates within the terms of its contract without defaulting

Bloomberg US Aggregate Bond Index Average Price: The weighted arithmetic average of the closing prices of the securities within the Bloomberg US Aggregate Bond Index.

Indices are unmanaged and their returns assume reinvestment of dividends and do not reflect any fees or expenses. It is not possible to invest directly in an index.

Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of 3/31/2023.

A Word About Risk: Pioneer Bond Fund

The market prices of securities may go up or down, sometimes rapidly or unpredictably, due to general market conditions, such as real or perceived adverse economic, political, or regulatory conditions, recessions, inflation, changes in interest or currency rates, lack of liquidity in the bond markets, the spread of infectious illness or other public health issues or adverse investor sentiment. The market price of securities may fluctuate when interest rates change. When interest rates rise, the prices of fixed income securities in the Fund will generally fall. Conversely, when interest rates fall, the prices of fixed income securities in the Fund will generally rise. Investments in the Fund are subject to possible loss due to the financial failure of issuers of underlying securities and their inability to meet their debt obligations. Prepayment risk is the chance that an issuer may exercise its right to prepay its security, if falling interest rates prompt the issuer to do so. Forced to reinvest the unanticipated proceeds at lower interest rates, the Fund would experience a decline in income and lose the opportunity for additional price appreciation. Investments in high-yield or lower rated securities are subject to greater-than-average price volatility, illiquidity and possibility of default. The securities issued by US Government-sponsored entities (e.g., FNMA, Freddie Mac) are neither guaranteed nor issued by the US Government. The portfolio may invest in mortgage-backed securities, which during times of fluctuating interest rates may increase or decrease more than other fixed-income securities. Mortgage-backed securities are also subject to pre-payments.

 A Word About Risk: Short Term Income Fund 

The market prices of securities may go up or down, sometimes rapidly or unpredictably, due to general market conditions, such as real or perceived adverse economic, political, or regulatory conditions, recessions, inflation, changes in interest or currency rates, lack of liquidity in the bond markets, the spread of infectious illness or other public health issues or adverse investor sentiment.The market price of securities may fluctuate when interest rates change. When interest rates rise, the prices of fixed income securities in the Fund will generally fall. Conversely, when interest rates fall, the prices of fixed income securities in the Fund will generally rise.Investments in the Fund are subject to possible loss due to the financial failure of issuers of underlying securities and their inability to meet their debt obligations.Prepayment risk is the chance that an issuer may exercise its right to prepay its security, if falling interest rates prompt the issuer to do so. Forced to reinvest the unanticipated proceeds at lower interest rates, the Fund would experience a decline in income and lose the opportunity for additional price appreciation.The securities issued by US Government-sponsored entities (e.g., FNMA, Freddie Mac) are neither guaranteed nor issued by the U.S. Government.The portfolio may invest in mortgage-backed securities, which during times of fluctuating interest rates may increase or decrease more than other fixed-income securities. Mortgage-backed securities are also subject to pre-payments.Investments in high-yield or lower rated securities are subject to greater-than-average price volatility, illiquidity and possibility of default.Investing in foreign and/or emerging markets securities involves risks relating to interest rates, currency exchange rates, economic, and political conditions.

 A Word About Risk: Pioneer Strategic Income Fund

The market prices of securities may go up or down, sometimes rapidly or unpredictably, due to general market conditions, such as real or perceived adverse economic, political, or regulatory conditions, recessions, inflation, changes in interest or currency rates, lack of liquidity in the bond markets, the spread of infectious illness or other public health issues or adverse investor sentiment. Investments in high-yield or lower rated securities are subject to greater-than-average price volatility, illiquidity and possibility of default. The market price of securities may fluctuate when interest rates change. When interest rates rise, the prices of fixed income securities in the Fund will generally fall. Conversely, when interest rates fall, the prices of fixed income securities in the Fund will generally rise. Investments in the Fund are subject to possible loss due to the financial failure of issuers of underlying securities and their inability to meet their debt obligations. Prepayment risk is the chance that an issuer may exercise its right to prepay its security, if falling interest rates prompt the issuer to do so. Forced to reinvest the unanticipated proceeds at lower interest rates, the Fund would experience a decline in income and lose the opportunity for additional price appreciation. The securities issued by US Government-sponsored entities (e.g., FNMA, Freddie Mac) are neither guaranteed nor issued by the US Government. The portfolio may invest in mortgage-backed securities, which during times of fluctuating interest rates may increase or decrease more than other fixed-income securities. Mortgage-backed securities are also subject to pre-payments. Investing in foreign and/or emerging markets securities involves risks relating to interest rates, currency exchange rates, economic, and political conditions.

The views expressed regarding market and economic trends are those of Amundi Asset Management US, Inc. ("Amundi US"), and are subject to change at any time. These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading intent on behalf of any portfolio.

Investing in mutual funds involves significant risks. For complete information on the specific risks associated with each fund, please see the appropriate fund’s prospectus or fact sheet, available on our  literature page.

Individuals are encouraged to seek advice from their financial, legal, tax and other appropriate professionals before making any investment or financial decisions or purchasing any financial, securities or investment-related product or service, including any product or service described in these materials. Amundi US does not provide investment advice or investment recommendations.

Before investing, consider the product's investment objectives, risks, charges and expenses. Contact your financial professional or Amundi US for a prospectus or summary prospectus containing this information. Read it carefully. To obtain a free prospectus or summary prospectus and for information on any Pioneer fund, please download it from our  literature section.

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