It appears likely that the U.S. economy will continue to improve, keeping interest rates elevated and volatile. The U.S. recovery, despite higher taxes, generally rising interest rates, and broad-based budget cuts enforced by the federal sequester, appeared to remain on track through the second quarter, and we see the United States maintaining this course in
Given the climate of rising rates — and the degree to which rates have shown their ability to back up on fears of the eventual quantitative easing (QE) withdrawal — we believe term structure risk is best avoided in favor of sectors with more attractive risk-and-return profiles. In the second quarter of 2013, the debate
It appears that the effects of the major deleveraging event in 2008 — punctuated by the collapse of Lehman Brothers — has finally shifted into a second phase. For the past four years, fixed-income investors have been influenced primarily by fear of another Lehman-type event, and this has affected pricing in general. Now we believe
Despite the uncertain macroeconomic environment, we continue to believe that a strategy that relies on rates declining further to drive returns is a risky proposition. At current levels, interest rates would not have to increase much in order for investors to start seeing price declines in Treasuries and certain other high-quality bonds that today offer
We believe municipal bond investments are potentially quite attractive: Defaults have remained low, contrary to overblown predictions in the media; spreads are attractive on a historical basis; and muni/Treasury ratios are still above historical averages. Defaults in the municipal bond market are generally misunderstood. While defaults do happen, they occur with far less frequency than
Spreads on high-yield bonds widened to attractive levels even as the expected corporate default rate has remained subdued.
Bond markets in Europe and emerging markets face a host of challenges in the years ahead.
Uncertainty remained high in the fourth quarter of 2011 as the large macroeconomic challenges that dominated headlines throughout the year continued to weigh on investor confidence. Treasury rates in the United States declined slightly amid solid demand, while discussions over reducing the size of the federal deficit continued to take center stage heading into the
Market volatility and other factors influenced positioning of Putnam Diversified Income Trust.