Fixed Income Sector Performance (as of 9/30/09)

Chart of the Week for October 23 - October 29, 2009

Similar to the fixed income market as a whole, returns for individual sectors may go up or down. A sector may outperform over an extended period and then underperform in subsequent periods. The chart above compares the performance of eleven fixed income sectors for the calendar year 2008 and the first three quarters of 2009.

During 2008, the equity stock market dropped precipitously as credit markets froze around the globe. Fixed income sectors that are closely tied to the availability of credit experienced a similar decline. For example, high-yield bonds, as represented by the Barclays U.S. Corporate High-Yield Index, fell 26.16%, while emerging markets bonds, represented by the Barclays Emerging Markets Index, dropped 14.75%. Fixed income sectors associated with the U.S. Government benefited from a desire for government protection and had positive performance.

Fixed income sector performance during the first three quarters of 2009 has completely reversed ranks. The best performers in 2008 have been the worst in 2009, and vice versa. For example, high-yield and emerging markets bonds have led the charge, returning 48.98% and 31.10%, respectively. This year's bottom dwellers are government and long-term government bonds, with negative returns of 1.21% and 7.49%, respectively.

Clearly, performance fluctuates over time and returns depend upon the market environment, which is hard to predict. Investors should note that even U.S. Government securities can decline in value and investing in sectors such as high-yield or emerging market bonds involve additional risk. It is prudent to be cautious before focusing on any specific sector.

This illustration was compiled by information from outside sources. These companies are not affiliated with ICMA-RC. This information is being provided for educational purposes and is not intended to be construed as or relied upon as investment advice. ICMA-RC does not offer specific tax or legal advice. Individuals are advised to consider any new investment strategies carefully prior to implementing.

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The performance data quoted represents past performance. Past performance is no guarantee of future results. Investment returns and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data illustrated. For performance data current to the most recent month end, contact ICMA-RC Services, LLC by calling 800-669-7400 or by writing to 777 North Capitol Street, NE, Washington, DC 20002-4240. Para asistencia en Español llame al 800-669-8216. Performance data current to the most recent quarter end is available by visiting www.icmarc.org.