KEY TAKEAWAYS
- The prospect of an increase in the federal funds rate has raised questions about future bond performance for some investors.
- Our analysis of global government bond data from 1984-2021 shows no reliable relation between past changes in the federal funds rate and either future bond excess return over cash or future term premiums.
- We can target higher expected returns by dynamically varying a strategy’s duration decision based on current term spreads across global yield curves.
Read the full article by Dimensional Researcher Mingzhe Yi, “All Eyes on the Fed? A Look at Federal Funds Rate, Bond Return, and Term Premium”, HERE.
DISCLOSURES
The information in this document is provided in good faith without any warranty and is intended for the recipient’s background information only. It does not constitute investment advice, recommendation, or an offer of any services or products for sale and is not intended to provide a sufficient basis on which to make an investment decision. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations. Unauthorized copying, reproducing, duplicating, or transmitting of this document are strictly prohibited. Dimensional accepts no responsibility for loss arising from the use of the information contained herein.
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RISKS
Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful.
Eugene Fama is a member of the Board of Directors of the general partner of, and provides consulting services to, Dimensional Fund Advisors LP.
UNITED STATES: Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.
Investment products: • Not FDIC Insured • Not Bank Guaranteed • May Lose Value
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