Bond Prices Rise as Chaos Rules in Europe and Russia. - Best of Funds


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Tensions are almost boiling over in the Ukrainian conflict with Russia.  It was revealed that Russian troops and vehicles have begun to amass on the Eastern border with Ukraine. Moreover, the recent sanctions against Russia by the U.S. and their European allies, caused President Putin to order his government to prepare retaliatory measures against the U.S. and their European counterparts. 

While this might be enough to have investors looking into the bond market for some safety, this was not the only negative news to come out of Europe and Russia. 

Italy, posted second quarter GDP data, and the numbers indicated that the country had once again slid back into a recession.  Germany, saw manufacturing numbers decline.  The United Kingdom saw industrial production output increase by a paltry 0.3% (month to month), while the consensus estimate was for 0.6% growth. 

The combination of this negative news caused the Asian markets to decline, then the UK markets slid, and finally caused the U.S. markets to open lower on the day. 

Smart Money

All these factors have caused investors to flee to safety by purchasing U.S. and German bonds.  This caused the yields of major Bonds to decline (note: bond yields decline as prices go up, and bond yields go up while prices go down).  The 10 year U.S. note declined 4 basis points, while German bond yields declined across the board, and the UK 10 year gilt dropped 7.5 basis points.

It is apparent that many smart investors are getting rid of their now more tenuous assets, and are running as fast as they can to the bond market. 

To protect against the declining economies in Europe and the tensions in Russia, a savvy investor should look towards Investment Grade Bond Mutual Funds.  These funds tend to invest in bonds issued by governments and corporations, or asset backed mortgage bonds.  With the usage of Zacks Mutual Fund Rank , investors can find the best producing safe haven. 

Hot Investment Grade Bond Mutual Funds

Natixis Loomis Sayles Strategic Income Fund ( NEFZX ), a Zacks Rank #1 (Strong Buy) seeks high current income with a secondary objective of capital growth. The fund invests substantially all of its assets in income producing securities (including lower-quality securities, or 'junk bonds') with a focus on U.S. corporate bonds, convertible securities, foreign debt instruments, including those in emerging markets and U.S. government securities. The fund declares dividends daily and pays them monthly. The fund distributes capital gains annually.

This fund is heavy U.S. treasuries and Canadian government bonds. 

Past Performance: 1 year 15.47%, 3 year 9.34%, 5 year 13.35%.

Delaware Extended Duration Bond Fund ( DEEAX ), a Zacks Rank #1 (Strong Buy) seeks total return through a combination of income and capital appreciation. The fund invests primarily in U.S. corporate bonds that have investment grade credit ratings in the four highest categories.  The fund invests at a greater total return than some U.S. government bond funds but at a lower risk than many high-yield bond funds. The fund offers dividends monthly and capital gains in November.

This fund is heavy top corporate companies like Verizon, Ingersoll Rand, and Gilead.

Past Performance: 1 year 14.34%, 3 year 10.78%, 5 year 13.38%.

Vanguard Long-Term Investment-Grade Fund ( VWESX ), a Zacks Rank #1 (Strong Buy) seeks a high and sustainable level of interest income. The fund invests in a widely diversified group of long-term bonds, most of them issued by corporations with strong credit ratings. It may also invest in U.S. Treasury securities and mortgage-backed securities. The fund also seeks to improve returns or its income stream by emphasizing individual securities and sectors of the bond market that represent good value based upon historical yield relationships. Dividends are declared daily and distributed monthly. Capital gains, if any, are distributed annually in December.

This diversified fun is heavy U.S. treasuries, Wells Fargo, General Electric, and HSBC Holdings.

Past Performance: 1 year 12.16%, 3 year 9.40%, 5 year 10.28%.

Loomis Sayles Bond Fund ( LBFAX ), a Zacks Rank #1 (Strong Buy) seeks high total investment return through a combination of current income and capital appreciation.  The fund seeks to attain its objective by normally investing substantially all of its assets in fixed income securities, although up to 20% of its assets may be invested in preferred stocks.  The fund offers dividends monthly, and capital gains annually.

The Loomis fund is heavy U.S. and Canadian bonds, Intel, and Ford.

Past Performance: 1 year 11.87%, 3 year 7.73%, 5 year 11.87%.

View All Zacks #1 Ranked Mutual Funds
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Mutual Funds
More Headlines for: NEFZX , DEEAX , VWESX , LBFAX

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