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Discover John Hancock Bond and Investment Grade Bond Funds
Senior Portfolio Manager Jeffrey N. Given, CFA, shares valuable insight into the current state of the fixed-income market after the second quarter of 2024. He explains why yield curve positioning can be more effective than shifting duration and offers his outlook on where the team is seeing value.
After embarking on its most ambitious tightening cycle in decades, it appears that the U.S. Federal Reserve (Fed) has been successful in its efforts to rein in inflation after the measure topped 9% in June 2022, a level not seen in more than 40 years. The central bank has kept rates steady since July 2023 and has signaled that rates are likely at their peak for this tightening cycle and could be nearing a policy pivot.
Investors don’t appear particularly optimistic about the Fed’s chances of success. Typically, bonds—especially U.S. Treasuries—with longer maturities offer higher yields than short-dated bonds. When that ceases to be the case, the yield curve is said to be inverted—as is the case today. The difference between 2- and 10-year Treasuries has been negative (meaning the yield on 2-year bills has been higher) since July 2022, and that inversion has historically been a reliable predictor of a looming recession.
Moderate inflation and higher rates haven’t always been bad news for bonds. For one, such an environment is generally correlated with higher coupons, which is a significant driver of total returns. Since 1990, in years when inflation rose at a rate of 3% to 5%, many segments of the fixed-income market posted positive returns. At the top of the list: core and core-plus strategies. It’s worth noting that in years with significantly higher rates of inflation, bond market performance has been much more volatile. Since 1970, there have been 10 years when inflation topped 6% (including 2022); core-plus strategies posted declines in four of those years, while core bonds lost ground in three.
Source: Morningstar Direct, as of 12/31/23. It is not possible to invest directly in an index. Past performance does not guarantee future results.
Though rates on cash alternatives such as CDs have increased, they still lag bond yields and face reinvestment risk if rates move lower. Along with higher yields, several areas of the U.S. fixed income market are also offering attractive valuations relative to history. This means that the types of bonds held within core and core-plus strategies have the potential to provide price appreciation in addition to yield.
Source: FactSet, as of 6/30/24. The Bloomberg U.S. Corporate Investment Grade Index tracks the Investment-Grade, fixed rate, taxable corporate bond market. The Bloomberg U.S. Aggregate Securitized Mortgage-Backed Securities (MBS) Index tracks the performance of investment-grade U.S. securitized mortgage-backed securities. The Bloomberg U.S. Aggregate Government/Treasury Index tracks public obligations of the U.S. Treasury comprising U.S. Treasury bonds and notes across maturities ranging from one to thirty years. The Bloomberg U.S. Corporate High Yield Bond Index tracks the performance of the U.S. dollar-denominated, high-yield, fixed-rate corporate bond market. Savings, money market and 12-month CD rates are measured by the FDIC national averages. Bond yields are represented by the Bloomberg U.S. Aggregate Bond Index, which tracks the performance of U.S. Investment grade bonds in government, asset-backed, and corporate debt markets. It is not possible to invest directly in an index. Past performance is not a guarantee of future results.
Established asset manager with global resources and expertise extending across equity, fixed-income, and alternative investments as well as asset allocation strategies
| Fund | Morningstar category | Use for |
|---|---|---|
|
JHBIX
Bond Fund Class I
|
Morningstar category Intermediate Core-Plus Bond | Use for Diversifying income holdings |
| Morningstar category Intermediate Core Bond | Use for High-quality income opportunities |
As we commemorate 50 years since the launch of John Hancock Bond Fund, hear what our team is thinking as we celebrate this special milestone.
Separately managed accounts (SMAs) can be an ideal solution for high-net-worth institutional or accredited investors looking for a more tailored approach to their investments. Find out more about how our SMA capabilities can help provide a level of personalization and control to meet specialized and sophisticated investment needs. Explore our separately managed accounts.
March 1, 2024
May 3, 2024
May 23, 2024
The Composite Index of Leading Indicators (LEI) is published monthly by The Conference Board and tracks 10 economic components whose changes tend to precede changes in the overall economy. The Consumer Price Index (CPI) tracks the average change of prices over time by urban consumers for a market basket of goods and services. The S&P 500 Index tracks the performance of 500 of the largest publicly traded companies in the United States. U.S. aggregate is represented by the Bloomberg U.S. Aggregate Bond Index, which tracks the performance of U.S. investment-grade bonds in government, asset-backed, and corporate debt markets. U.S. government is represented by the Bloomberg U.S. Government Bond Index, which tracks the performance of U.S. Treasury and government agency bonds. EM sovereign (US$) is represented by the J.P. Morgan Emerging Markets Bond Index (EMBI) Global Index, which is a market-capitalization-weighted index that tracks the performance of U.S. dollar-denominated Brady bonds, Eurobonds, and traded loans issued by sovereign and quasi-sovereign entities. U.S. investment-grade corp is represented by the Bloomberg U.S. Corporate Index, which tracks the performance of the investment-grade, U.S. dollar-denominated, fixed-rate, taxable corporate bond market. U.S. high-yield corp is represented by the Intercontinental Exchange (ICE) Bank of America U.S. High Yield Index, which tracks the performance of below-investment-grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market and includes issues with a credit rating of BBB or below. EM corp (US$) is represented by the J.P. Morgan Corporate Emerging Markets Bond Diversified Index, which tracks U.S. dollar-denominated debt issued by emerging-market corporations. U.S. CMBS is represented by the Bloomberg CMBS ERISA-Eligible Index, which tracks the performance of investment-grade commercial mortgage-backed securities (CMBS) that are Employee Retirement Income Security Act of 1974 (ERISA) eligible under the underwriter’s exemption. U.S. ABS is represented by the Bloomberg U.S. Asset-Backed Securities (ABS) Index, which tracks the performance of three subsectors—credit and charge cards, autos, and utilities. The index includes pass-through, bullet, and controlled amortization structures. U.S. MBS is represented by the Bloomberg U.S. Mortgage-Backed Securities (MBS) Index, which tracks 15- and 30-year fixed-rate securities backed by the mortgage pools of Ginnie Mae, Freddie Mac, and Fannie Mae. The J.P. Morgan Corporate Emerging Markets Bond Index tracks U.S. dollar-denominated debt issued by emerging-market corporations. It is not possible to invest directly in an index. Past performance does not guarantee future results.
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© 2024 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
Fixed-income investments are subject to interest-rate and credit risk; their value will normally decline as interest rates rise or if an issuer is unable or unwilling to make principal or interest payments. Investments in higher-yielding, lower-rated securities include a higher risk of default. Foreign investing, especially in emerging markets, has additional risks, such as currency and market volatility and political and social instability. Mortgage- and asset-backed securities may be sensitive to changes in interest rates, and may be subject to early repayment and the market’s perception of issuer creditworthiness. Liquidity—the extent to which a security may be sold or a derivative position closed without negatively affecting its market value, if at all—may be impaired by reduced trading volume, heightened volatility, rising interest rates, and other market conditions. The use of hedging and derivatives could produce disproportionate gains or losses and may increase costs. Fund distributions generally depend on income from underlying investments and may vary or cease altogether in the future. Please see the fund’s prospectus for additional risks.
