Bond market performance 2012 – 2013

Last year, there was lots of uncertainty over the looming fiscal cliff. This caused stocks to suffer heavily. But in the face of all the gloom, bonds did not fail to attract money. Though stock mutual funds saw the withdrawal of more than $ 122 million in November 2012, the total inflow of bond funds, including municipal and taxable bonds stood at a whopping $300 million.

But despite this, investor behavior was not encouraging. The Barclays Capital U.S. The Aggregate Bond Index had a gain of below 5 percent last year. Wrong alignment or misalignment of priorities is a short-lived phenomenon, say analysts. So bonds are expected to be a favored investment option among investors in 2013. Many experts are of the view that given the fluidity of stock markets, people are averse to investing their retirement money in stocks. With a deficit in trust in stocks, bonds are set to gain more acceptance.

High-yield funds are what investors should look for. These funds will augment their fixed-income investments for the current year. In 2012, the average fund in the high fund category gained nearly 15 percent. Certain high-yield funds such as Loomis Sayles High Income reached 20 percent last year. Analysts predict that these trends show that rich-yield investments will once again outperform stocks this year too. Besides, high yield funds, municipality bonds are expected to do well in 2013. This is because municipalities have kept their finance under control. This is likely to inspire investor confidence in the current year. Another reason why bond mutual funds are expected to do well is because the prospects for U.S. treasuries aren’t that promising. Treasuries can now yield only 1.7 percent.  Another good reason for bonds to perform well this year is the unstable interest rates. Rising interest rates will lead to a fall in bond prices. This will draw more investments in bonds.