Which asset classes lost investors most money in 2016?
20 Dec 16
Thanks to the end-of-year ‘Trump rally’, 2016 has been a pretty good year for investors in risky assets. However, not all asset classes have fared so well.
US government bonds are ending the year with their gains of the first half of the year all but wiped out by the strong upward move in yields since Donald Trump’s election in November. The 10-year bond yield now stands at 2.57%, its highest level in more than five years.
While investors who did not hedge their currency exposure will have made a return thanks to the relative strength of the dollar, those who hedged their US government bond holdings back to their base currency (as most investors do for long-dated bond holdings) have possibly lost some money, depending on the duration of their portfolios.
The benchmark Barclays US Treasury 10-year bond Index, which has a modified duration of a little over 7 years, has made a return close to zero in 2016, and is down almost 5% over the last three months of the year. Things are looking little better for 2017, as the Fed is projecting three further rate hikes.
