Duration continued its 2019 outperformance in the second quarter. Longer dated treasury, corporate, and municipal bonds outperformed shorter durations in anticipation of future rate cuts from the Fed and lackluster inflation.
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.