U.S. Treasury yields disappointed in 2014.

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Ten-year Treasurys in the U.S. were at 3% at the start of last year, and investors expected rates would move higher to 3.25% or 3.5%, says Andrew Kronschnabel, portfolio manager at Logan Circle Partners in Philadelphia. He manages the Renaissance U.S. Dollar Corporate Bond Fund.

Instead, 10-year Treasurys closed the year at 2.17%, and they’re currently sitting at about 2%, he adds. “The turn in rates has surprised people consistently over the last couple of years.”

Read: U.S. economy isn’t as strong as you think

Yet, compared to other countries, U.S. Treasury yields are high, says Kronschnabel. “When you look at Europe, you see front-end rates in Germany and Switzerland are negative. And, rates in Italy and Spain are […] 70bps and 100bps lower than [rates] in the U.S. right now.”


Investment prospects

Despite low yields in the U.S. in 2014, advisors had the chance to add value to clients’ portfolios, says Kronschnabel.

Read: Let’s keep rates positive

“In the high-grade market,” he adds, “there was a 15% return difference between the top- and bottom-performing sectors of the market.” And, “in the high-yield space, there was a 17% dispersion between the top- and bottom-performing sectors of the market.”

He finds cable and satellite providers performed well in 2014, while energy companies lagged.


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