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With Yields So Low, Where Do You Go?

Intermediate core-bond investors should be cautious in this environment.

Market observers across professions and platforms have noted the significant drop in yields in the fixed-income marketplace over the past several decades and especially since the global financial crisis of 2008. While there are a number of reasons for this phenomenon, one pertinent actor in this drama is the U.S. Federal Reserve. In response to the crisis, the Federal Open Market Committee slashed the federal-funds rate, the interest rate on which depository institutions trade balances with each other overnight, close to zero in early 2009 and it kept it there until late 2015. While the FOMC hiked rates on and off from 2016 through 2018, the FFR now once again sits in the near-zero range after being slashed in the wake of the coronavirus-related economic downturn of 2020.