Since the financial crisis of 2008, loose monetary policy by the U.S. Federal Reserve (Fed) and other central banks has changed the characteristics of the primary U.S. investment-grade bond index, the Bloomberg Barclays U.S. Aggregate Bond Index. With higher duration and lower yields, the risk/reward tradeoff is not the same as it was 15 years ago.

In 2018, the Fed began raising short-term interest rates, because it appeared that the economy could support higher rates. Since then, sentiment has shifted considerably. Expectations surrounding monetary policy have changed dramatically over the last year, as market participants went from predicting additional rate hikes in 2019 to pricing in rate decreases. Slowing economic growth, muted inflation and global central banks’ willingness to increase economic stimulus are just some of the factors that have kept government bond yields near historical lows. In this environment, it’s become more challenging to find consistent income for investors.

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