Key Themes

Balancing Yield and Risk in a Changing World

YIELD SECTORS OFFER POTENTIAL BENEFITS
The recent relative performance of fixed income plus sectors highlight strong demand for yield.

Interest rates are rising but remain low by historical standards, pushing investors beyond core fixed income sectors in search of yield. The increased diversification across (1) geography and (2) sectors helped drive relatively strong results in core plus sectors such as high yield and leveraged loans.

As of June 30, 2018
Sources: Bloomberg Barclays, FactSet, JPMorgan, and S&P/LSTA.
Asset classes are represented by Bloomberg Barclays, JP Morgan, and S&P indices.
"Plus" sectors represent more aggressive, higher-risk sectors versus "Core" sectors.

Past performance cannot guarantee future results.

DIVERGENCE BRINGS OPPORTUNITIES...
Variations in interest rate and credit cycles offer diversification opportunities.

Interest rates are rising in the U.S., falling in China, and stabilizing in the eurozone. At the same time, credit quality has fallen in the UK, plateaued in the U.S., and started to recover in the eurozone. The growing breadth, depth, and complexity of the global fixed income market highlight the importance of broad diversification, in-depth research, and active management.

As of June 30, 2018
Source: T. Rowe Price

Past performance cannot guarantee future results.

Diversification cannot assure a profit or protect against loss in a declining market.
Diversification cannot assure a profit or protect against loss in a declining market.
...BUT MIND YOUR STEP.
A broader opportunity set carries benefits and risks and calls for a balanced approach.

A portfolio that includes plus sectors, such as high yield, emerging markets, and leveraged loans, may benefit yield-hungry investors. However, many of these enhanced-yield assets are highly correlated with equities and could alter a portfolio’s broader risk profile. It’s important to be mindful of these risks and maintain a balanced approach to portfolio construction.

As of June 30, 2018
Sources: Bloomberg Barclays, FactSet, JPMorgan, S&P/LSTA
Analysis by T. Rowe Price
Asset classes are represented by Bloomberg Barclays, JP Morgan, S&P/LSTA, and benchmark government bond indices.
*Due to data availability, correlation data for EM Corporate are based on returns from January 2011 to present, rather than 10 years.

Past performance cannot guarantee future results.

Important Information

Download a prospectus.

"Yield sectors offer potential benefits" chart:
Benchmarks represented are as follows: U.S. Treasury represented by the Bloomberg Barclays Global US Treasury Index, U.S. Aggregate represented by the Bloomberg Barclays U.S. Aggregate Index, Municipal Bonds represented by Bloomberg Barclays Municipal Bond Index, U.S. Investment-Grade Corporate represented by Bloomberg Barclays U.S. Investment Grade Corporate (300MM) Index, Global Aggregate represented by Bloomberg Barclays Global Aggregate Index, Bank Loans represented by S&P/LSTA U.S. Leveraged Loan 100 Index, Muni High Yield represented by Bloomberg Barclays Municipal Bond High Yield Index, Emerging Markets Dollar represented by JP Morgan EMBI Global Index, Emerging Markets Local represented by JP Morgan GBI-EM Global Diversified Composite Index, U.S. High Yield represented by Bloomberg Barclays U.S. Aggregate Credit- Corporate - High Yield (2000) Index, Global High Yield represented by Bloomberg Barclays Global High Yield Index. It is not possible to invest directly in an index.

Bloomberg Index Services Ltd. Copyright © 2018, Bloomberg Index Services Ltd. Used with permission.

Copyright © 2018 FactSet Research Systems Inc. All rights reserved.

Information has been obtained from sources believed to be reliable but JP Morgan does not warrant its completeness or accuracy. The index is used with permission.  The Index may not be copied, used, or distributed without JP Morgan’s prior written approval. Copyright © 2018, JP Morgan Chase & Co. All rights reserved.

Copyright © 2018, S&P Global Market Intelligence (and its affiliates, as applicable). Reproduction of S&P/LSTA in any form is prohibited except with the prior written permission of S&P Global Market Intelligence (S&P). None of S&P, its affiliates, or its suppliers guarantee the accuracy, adequacy, completeness, or availability of any information and is not responsible for any errors or omissions, regardless of the cause or for the results obtained from the use of such information. In no event shall S&P, its affiliates, or any of its suppliers be liable for any damages, costs, expenses, legal fees, or losses (including lost income or lost profit and opportunity costs) in connection with any use of S&P information.

"...but mind your step" chart:
Benchmarks represented are as follows: U.S. Treasury represented by the Bloomberg Barclays Global US Treasury Index, U.S. Aggregate represented by the Bloomberg Barclays U.S. Aggregate Bond Index, Municipal Bonds represented by Bloomberg Barclays Municipal Bond Index, U.S. Investment-Grade Corporate represented by Bloomberg Barclays U.S. Investment Grade Corporate (300MM) Index, Global Aggregate represented by Bloomberg Barclays Global Aggregate Index, Bank Loans represented by S&P/LSTA U.S. Leveraged Loan 100 Index, Muni High Yield represented by Bloomberg Barclays Municipal Bond High Yield Index, Emerging Markets Dollar represented by JP Morgan EMBI Global Index, Emerging Markets Local represented by JP Morgan GBI-EM Global Diversified Composite Index, U.S. High Yield represented by Bloomberg Barclays U.S. Aggregate Credit- Corporate - High Yield (2000) Index, Global High Yield represented by Bloomberg Barclays Global High Yield Index. It is not possible to invest directly in an index.

Dismiss
Tap to dismiss

Manage Subscriptions

Unsubscribe All
OK

Manage your watched Funds and Insights subscriptions here.

OK

Change Details

Congratulations! You are now registered.

Begin watching and receiving email updates for:

Ok

Sign in to manage your subscriptions and watch list.

Register

Download

Latest Date Range
Download Cancel

This content is restricted for Institutional Investors use only. We were not able to validate your status as an Institutional Investor with the information you provided at registration.

Please contact the T. Rowe Price Team with questions or to revise your status.

1-800-564-6958

You will need to accept the Terms & Conditions again.

Ok

You have updated your email address.

An activation email has been sent to your new email address from T. Rowe Price.

Please click on the activation link in order to receive email updates.

Ok

You have an existing account

Click OK to view your subscriptions and watch list.

OK

Confirm Cancel