As we celebrate the 4th of July with fireworks, the bond market has ended several weeks of providing explosive returns. With this recent downside volatility, we have implemented a new bond strategy for clients with significant taxable bond exposure.
Throughout 2013, we have been modeling various strategies that would allow us to take advantage of a multi-decade reversal in the direction of interest rates. Recent volatility has allowed us to implement this new strategy during the past several trading days.
The shift in our bond strategy aims to:
- Increase yield
- Lower duration and average maturity
- Lower interest rate sensitivity
- Decrease correlation to the Barclays Aggregate Bond Index (most bond managers attempt to outperform this benchmark)
- Increase diversification outside of U.S. borders
We look forward to sharing specific details with you during our next investment review.