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06.17.2010 / Fixed Income Markets Performing Well

The general theme in fixed income markets over the last year was a significant improvement in the prices of riskier asset classes. Investors moved very rapidly from extreme risk aversion at the height of the financial crisis in 2008 and early 2009, to a pursuit of higher yields in riskier assets as the crisis abated. Yield spreads tightened across all fixed income asset classes as the economy continued to display steady improvement.

"Individual security selection will become increasingly important in the performance of fixed income portfolios."

Now, with the recent concerns over European sovereign debt and the perceived potential for a double-dip recession very suddenly re-emerging, a flight-to-quality bias has resurfaced in the fixed income markets in recent weeks. As a result, U.S. Treasury and higher credit quality securities have outperformed riskier fixed income securities during the first part of the second quarter. Investors can be whip-sawed in these volatile times and may experience very poor returns by chasing a fast-moving market.

The Tributary Capital Management Aggregate Fixed Income Strategy has performed very well in this environment, as its holdings are generally higher credit quality than those of its peers. Through April, the Strategy’s year-to-date total return was 3.65%, while its benchmark index, the Barclays Capital Aggregate Index returned 2.84%.

We believe the majority of spread tightening and price appreciation across the broad universe of fixed income assets is likely behind us. Individual security selection will become increasingly important in the performance of fixed income portfolios. We believe our emphasis on maintaining a yield advantage over the benchmark index while still providing higher credit quality than our peers should lead to consistently strong performance in a highly volatile market.

For information on Tributary Capital Management please visit tributarycapital.com or email info@tributarycapital.com.


Comments are provided as general market commentary and should not be considered investment advice or predictive of any future market performance.  Past performance does not guarantee future results.

Investments are: Not FDIC Insured • May Go Down in Value • Not a Deposit • Not Guaranteed By the Bank • Not Insured By Any Federal Government Agency

Posted at 09:14 AM | Permalink
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