Reflecting on Coronavirus’ Impact on Today’s Bond Markets

Portfolio Manager John Lloyd discusses today’s large moves in many fixed income markets due to heightened coronavirus concerns and outlines strategies that may improve capital preservation amid the volatility.

Key Takeaways

  • The spreading COVID-19 coronavirus has pushed Treasury yields significantly lower, with the 10-year note testing historical lows. Meanwhile, investment-grade and high-yield corporate bond spread widening has been relatively muted.
  • Investors should be aware of how their portfolios are positioned as more defensive sectors in the corporate bond market should fare better if the spread of the virus accelerates.
  • Today’s swift and significant drop in bond yields is a reminder of the benefits of active management, including holding or adding to securities that can provide downside protection in volatile times.