With the Federal funds rate at 0-0.25%, Treasury yields have fallen to near historic lows. This type of low yield environment can cause investors to hunt for yield. However, spreads in risker fixed income have come in significantly compared to the start of the pandemic. This makes the risk-return dynamic of these investments less attractive. Although yields are low, high quality fixed income will continue to play an important role in asset allocation to provide downside protection and diversification.
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