Analysts are scratching their heads.
“It’s hard to believe that three months ago we looked upon the bond funds world with amazement because the average taxable bond fund was up 5.32 percent for the second quarter. We had to go back to Q2 1995 (+5.56 percent) to find a better quarter,” says Jeff Tjornehoj, a research manager for the United States and Canada with Lipper in Denver. “Considering those are the kinds of numbers we’re used to seeing over a full year, it was natural to expect the bond market to take a breather.”
But the bond rally went beyond most expectations, Tjornehoj notes, most notably in the muni-bond arena. High-yield municipal debt funds rocketed to the top of the quarterly performance tables with returns of 14.07 percent for the third quarter.
Treasury-related Lipper fund classifications were led by general U.S. Treasury funds (+4.74 percent) as strong bidding for Treasury paper boosted returns, including a rise of 2.04 percent in September.