Bond market turbulence: putting the recent volatility in context

February 06, 2018

Long-term yields have climbed steadily since the passage of tax reform in December 2017 and have gone up sharply in recent days. Daniel S. Janis III, senior portfolio manager for John Hancock Strategic Income Opportunities Fund, takes a closer look at what’s been driving that volatility and what may be in store for fixed-income investors over the near term.

Fixed-income investments are subject to interest-rate and credit risk; their value will normally decline as interest rates rise or if an issuer is unable or unwilling to make principal or interest payments. Investments in higher-yielding, lower-rated securities include a higher risk of default. Foreign investing, especially in emerging markets, has additional risks, such as currency and market volatility and political and social instability. Currency transactions are affected by fluctuations in exchange rates. Liquidity—the extent to which a security may be sold or a derivative position closed without negatively affecting its market value, if at all—may be impaired by reduced trading volume, heightened volatility, rising interest rates, and other market conditions. The use of hedging and derivatives could produce disproportionate gains or losses and may increase costs. Fund distributions generally depend on income from underlying investments and may vary or cease altogether in the future. Please see the fund’s prospectus for additional risks.

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