Q2 2022 Investment Review

“Nowhere to hide” was a phrase that we continued to hear throughout the second quarter as risk markets sold off while inflation surprised to the upside, the Fed leaned hawkish and the war in Ukraine raged on.   The Bloomberg Aggregate Index was down about 4.5% bringing the year-to-date performance number down 10%. There really was no place to hide unless you were heavily invested in Asia Pacific debt, as this area of the market was up marginally. The table to the right shows just how difficult it was to find a safe spot within the bond market as rates dominated the market tone.

Bond yields continued their unrelenting climb as inflation hit a multi-decade high during the second quarter of 2022. U.S. Treasury bonds sold off as the Fed moved yields higher. The benchmark 10-yr Treasury began the quarter at 2.34% but moved solidly northward to finish at a yield of 3.01% after making a run at 3.50% in mid-June. Corporate bonds also suffered, losing over 7% as outflows and a general risk-off sentiment dominated the fixed income market. Structured securities within the index finished slightly better but still in the red with ABS bonds down about 1% and CMBS down 3%. The less rate sensitive Bloomberg Intermediate Gov/Credit Index finished down 2.37% on the quarter.