Sarah Bush: The overarching theme in the bond markets so far in 2015 has been the volatility. Everyone has their eye on the Fed. It's expected that the Fed will start to raise short-term interest rates sometime this year. There are some people thinking maybe we are looking at 2016, but consensus is still sometime this year.
We did have a big rally in the Treasury market in January. It went the other way in February, but Treasuries are still one of the best-performing parts of the market, year to date. So, funds in the long-term government-bond Morningstar Category and also anything with a lot of duration, any long-term bond category, has done well.
It's been a little bit more mixed in the high-yield market. High-yield has rebounded nicely after a bad second half of 2014, but high-yield energy companies are still struggling. They have rebounded a little bit, but there are still a lot of those names that are trading pretty low. There has been a lot of volatility in the oil market to go along with that.
The mortgage market has, interestingly, been a big underperformer, year to date. And there have been a lot of managers who have been underweighting this sector. There are concerns that, as the Fed gets out of its quantitative-easing program, the sector is going to come under some pressure, and that has started to happen.
The other really big story of the year, though, has been the strong dollar. So, if you are looking at funds with foreign-currency exposure in the foreign-bond category or in the emerging-markets bonds category, some of those have come under pressure. So, that has meant some struggles for foreign-bond and emerging-markets bond funds that have currency exposure, and also among more wide-ranging funds such as Loomis Sayles Bond (LSBRX). That's a fund that has a fair amount of foreign-currency exposure and has underperformed.
PIMCO Total Return (PTTAX), interestingly, has been on the other side of that trade with short exposures to both the euro and the yen. So, they have done well.
The other thing that's worked for managers this year so far has been long duration, as I mentioned earlier. So, Western Asset Core Plus Bond (WAPRX), which has had a long exposure to duration and interest rates, has done well, year to date. So, it's been another interesting quarter in the bond markets.