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Patience Has Rewarded Fixed Income Investors Following Rate Hike Cycles

Source: Bloomberg. Treasury securities are backed by the full faith and credit of the US government, while the other bond asset classes shown do not.  Data based on past performance, which is no guarantee of future results. See Terms and indices below for more information.

   

US Bond Sector Returns After Previous Fed Rate Hikes

Over the past 30 years, there have been four major tightening cycles. Following the two tightening cycles in 2000 and 2006, Federal Reserve interest rate hikes were followed by recessions. Yet, despite the economic slowdowns, major sectors of the US fixed income markets averaged positive returns during the one-year periods beginning three months after the Fed’s first rate action.

Fixed income markets typically price in estimated future hikes (and any consequent impact on credit spreads) before or early in rate hiking cycles, resulting in higher yields and a flatter yield curve, and in negative or lower fixed income returns. Following this initial adjustment period, fixed income returns typically recover, buoyed by higher yields.

Patience has often rewarded fixed income investors after past tightening cycles, and investors could be well served by waiting for the market to recover from a rate-driven drawdown.

Opportunities to Explore     

Investors seeking fixed income solutions to help navigate more volatile fixed income markets may want to consider broadly diversified funds with an intermediate term duration focus. Amundi US offers attractive fund options in this space, including Pioneer Bond Fund and Pioneer Strategic Income Fund.

Pioneer Bond Fund is a multi-sector bond fund that invests across a broad range of US dollar-denominated fixed income sectors, including US investment grade core, up to 20% in non-investment grade securities and up to 15% in non-US securities. 

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Pioneer Strategic Income Fund is a multi-sector bond fund that invests across a broad range of global fixed income sectors, including core US investment grade, non-investment grade, non-US country, currency and floating rate asset classes.

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Terms and Indices

Asset classes shown: High yield = Bloomberg US Corporate High Yield Index; Investment Grade (IG) Corporates = Bloomberg US Corporate Bond Index; Munis = Bloomberg Municipal Bond Index; Floating Rate = S&P/LSTA Leveraged Loan Total Return Index; Treasuries = Bloomberg US Treasury Index. MBS (Mortgage-backed securities) = Bloomberg US MBS Index.

Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of May 31, 2022. 

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: 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.

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.

Securities offered through Amundi Distributor US, Inc.
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Underwriter of Pioneer mutual funds, Member   SIPC.   

Not FDIC insured | May lose value | No bank guarantee Amundi Asset Management US, Inc.  Form CRS         Amundi Distributor US, Inc.  Form CRS