Bloomberg U.S. Aggregate Bond Index May Show if Bond Market Prepared for Near-Term Upside

Fidelity Investment recently pointed out, that their “…proprietary risk models, based on 5,000 simulations, suggest the bond market (represented by Bloomberg U.S. Aggregate Bond Index) may offer better than 45% odds for an annualized double-digit return over the next quarter, as opposed to about 5% odds for a quarterly annualized double-digit loss”.

“The potential for peak policy rates in 2023 also raises [...] expectations for positive bond-market returns, based on the historical return for multiple bond categories following peak yields,” added Fidelity.

In the same tonality, J.P. Morgan writes: “a string of strong data has sent bond yields soaring (the 10-year Treasury yield topped 4% again for the first time since March)”.

So investors should constantly monitor some aggregate bond index to detect any changes of patterns like the yield curve normalization – or any repeated attempts thereof. Some experts believe that the bond market is prepared for near-term upside – especially, if the current semiannual corporate earnings are to disappoint. As we know, indices are non-tradable benchmarks, so in order to get relevant exposure, an investor would like to call for assistance to assets such as CVSB. CVSB is an actively managed portfolio of investment grade U.S. and foreign fixed income instruments “exhibiting effective management of environmental, social, and governance (ESG) risks and opportunities” (that reads like quite loose definition, but still there’s a reasonable input filtration here). The fund aims for an average portfolio duration of one year or less.

CVSB seeks to maximize income and preserve capital by actively investing in investment-grade income-generating debt securities, including corporate, government and agency bonds, mortgage-backed and asset-backed securities, senior securities, money market instruments and taxable municipal debt securities. It invests primarily in USD-denominated securities, but may hold up to 25% of the portfolio in foreign debt denominated in local currencies. The fund aims to maintain a portfolio life of 1 year or less through U.S. Treasury bonds and related futures contracts. Because of active management, the final selection of securities is at the sole discretion of the advisor.