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High-Quality Bonds: Revisiting The Benefits Of Owning Bonds

By LPL Financial

The presence of record, or near record, low yields in early 2015 has diminished bonds’ ability to provide diversification benefits for investors. Bonds are off to a strong start so far in 2015, in part due to stocks stumbling out of the gates to start the new year. One year ago, at the start of 2014, strong equity market performance in 2013, combined with a tough year for bonds and still low yields, caused some investors to overlook the fact that bonds can still serve as an effective diversification tool. Fast forward to early 2015 and many overseas bond markets are offering all-time record low bond yields. In the United States, the 30-year Treasury yield closed January 2015 at a fresh record low with the 10-year Treasury not far from its 1.4% all-time low of 2012. This week we revisit our “Why Own Bonds?” commentary from January 14, 2014, to illustrate that bonds, even in a lower-yield environment, can still provide diversification…