The Federal Reserve said the rate hike may take "considerable time" after the end of its bond buying program. The Federal Open Market Committee (FOMC) in its latest two-day policy meeting gave no hints about the timing of an increase in the federal funds rate. They generally qualify as the highest credit quality bonds.įederal Reserve Trims Bond Buyback, Rates Remain Low Government bonds, or Treasuries, are not assigned any rating. Usually, 'AAA' and 'AA' (high credit quality) and 'A' and 'BBB' (medium credit quality) are the investment grade bonds. Bond rating firms, like Standard & Poor's, assign the ratings using upper- and lower-case letters. However, before we cherry pick the top 5 performing investment grade bond funds of this year so far, let's look into what investment grade bonds are.īonds are assigned ratings based on credit quality. Investing in investment grade bond funds is a prudent step in the current scenario. Also, the benchmark 10-year Treasury yield is down to about 2.5% level from 3%, reflecting inflating Treasury prices. This stems from the fact that the market value of a bond is inversely proportional to interest rates.Ĭoupled with the low-rate environment, economic data has been mixed of late and the geopolitical tensions have sparked volatility in equity markets.
A low interest rate environment is favorable for investments in bond funds. The low-rate environment is most likely to continue for some more time and perhaps the baby boomer generation is not yet ready to give up on their bond funds. This index, which is a measure of the investment-grade debt, reflects the positive that bond funds have been enjoying so far this year.
The iShares Barclays Aggregate Bond Fund (AGG) has notched gains of 2.4% so far this year.
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