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Video: 2019 outlook for short-duration bonds

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      By Vishal Khanduja, CFA, Calvert Fixed Income Portfolio Manager

      Boston - When thinking about the year ahead, we expect some of the same themes from 2018 will spill over into 2019.

      For example, we believe the Federal Reserve will continue to tighten and that other central banks could move in the same direction this year. Along with geopolitical risks, these tighter monetary policies may lead to broadly higher rates, higher volatility and lower returns for some asset classes. However, we believe this will eventually present a good opportunity set for active managers in fixed income.

      (Tap or click the image below to view the video.)

      Blog Image Vishal K 19 Outlook Jan 9

      Currently, we are favoring shorter duration and spread duration assets. Overall, since we are later in the cycle, we believe it is prudent to be cautious on duration risk and very selective with credit. For fixed-income investors, we believe assessing the health of the balance sheet -- whether it's consumer, sovereign or corporate balance sheets -- will be even more important in 2019.

      Specifically, we like shorter duration bonds that are tied to U.S. consumer balance sheets. Elsewhere, we are also favoring investment-grade corporate bonds in the financial sector, floating-rate securities and high-quality asset backed securities (ABS) and mortgage backed securities (MBS).