Administration July 6, 2002

Bonds Funds Beat out Stocks in May

June 7, 2002 (PLANSPONSOR.com) - Though gains were muted, US bond mutual funds, benefiting from a positive interest rate outlook, outperformed stock funds, which fell amid investor pessimism over the outlook for corporate earnings.
Reported by

According to data from Lipper Inc, the average taxable US bond fund, gained 0.34% in May, significantly lower than the previous month’s 1.1% return.

With roughly $2.47 trillion in combined assets, the funds boast year-to-date returns of 1.71%, while in comparison the average diversified US stock fund fell 1.92% in May and is down 5.05% so far this year

Breakdown

High-yield fixed income funds were stung when energy company Dynegy, Inc was accused of using phony deals or “round-trip” trades to pump up volume and revenue and cable operator Adelphia Communications had its high yield bonds downgraded another notch by Moody’s Investor Service.

Over the month high-yield funds lost 0.82% after two consecutive positive months. Still, with year-to-date returns of 7.17% they rank among the 2002’s top performers.
 
Intermediate US Treasury funds gained 1.25% in May, bringing year-to-date returns to 4.37%.

In emerging markets debt, funds fell by 0.89% as contagion from market turbulence in Brazil affected other markets. 

«