While it’s easy to focus on headlines and forget the primary purpose of fixed income in your asset allocation, it’s important to consider the role of bonds in your portfolio in advance of such changes. Focus on risk and return trade-offs, otherwise you may find yourself running into unintended risk.
1,2Correlations and sensitivity to credit spreads are calculated from the inception of the Markit iBoxx USD Liquid High Yield Index to last quarter-end (11/1/2006 to 3/31/2014).
Del Stafford is Head of Multi-Asset Portfolio & Investment Consulting for BlackRock. He is the newest contributor to The Blog.