2018 brought significant volatility for the fixed income markets. After four rate hikes and continued quantitative tightening from the Fed, the ten-year treasury rose from a 2.46 in January to a peak of 3.23 in November.
The yield curve continued to flatten in the second quarter of 2018; as of 06/29/2018, the thirty-year treasury only yielded 13 basis points more than the ten-year treasury. Duration underperformed in the first half of the year, while some shorter fixed income indices ended the second quarter in positive territory.
Duration performed well in 2017 as the yield curve flattened. Treasury yields rose from 1.21% to 1.88% on 2‐year notes while yields dropped on 30‐year treasury bonds from 3.04% to end the year at 2.74%. The high yield sector outperformed with equities, followed by long municipals, intermediate municipals, and intermediate government and agency paper.