A short, an intermediate, and a long bond board an airplane. Where do they sit?

If you are a frequent air traveler, you are familiar with the variety of ways you can experience turbulence. Much of that experience depends on where you are seated on the plane. At the front, you still feel the rough patches, but they are relatively mild. As you move farther back, the more dramatic the effect and perhaps the more airsickness you may suffer.

When it comes to a turbulent ride in the bond market, you will find bonds seated in the following manner: short bonds at the front, intermediate bonds naturally somewhere in the middle, and long bonds at the back. Short-term bonds keep their yields low and tight across their hips, reducing the impact during turbulence. Long-term bonds wear their yields a bit looser and are subject to greater ups and downs as they pass over the same rough air.

In client portfolios, the goal during the recent fixed income changes is an attempt to move closer to the front of the plane. Reduced risk and lower duration will temper the effects of the volatility we are currently seeing in the bond market. We may adjust our positioning if the air smooths out and looks to be more stable on the horizon.

Typical index bonds and longer dated treasuries are down for the year, as seen on the market summary below. Across the board, all markets are experiencing short-term volatility, but equities continue to make gains this year. US small caps show strength in the first quarter, while international and emerging markets are lagging, but are still positive for the year. As always, your SoundView team is here to answer any questions you may have and are available to hold your hand while we pass over any rough patches.