Total Return Bond Fund and Short-Intermediate Total Return Bond Fund are managed to capture opportunities and manage risk through various rate environments. Our experienced sector managers use an arsenal of interest-rate and sector-related decision tools to quickly and decisively position fund holdings across the fixed-income marketplace.

Time-tested processes

Intermediate Bond
Total Return Bond Fund
SHORT-TERM BOND
Short-Intermediate Total Return Bond Fund

Bond strategies in a fluctuating market

A broad mix of bond sectors

U.S. government and investment grade corporates; mortgage-backed, asset-backed and commercial mortgage-backed securities; and investment-grade corporates.

Flexible portfolio positioning

Fund managers perform thorough economic analysis of the business cycle, valuation indicators and global attractiveness to help position the portfolios to benefit from any rate environment.

Risk and reward balance

Continuous assessment of risk versus return at each decision point seeks to add consistent value while managing performance volatility.

Reasons to own corporate bonds now

Views are as of August 6 2020 and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector.
“There is a mountain of cash sitting on the sidelines just looking for a home.”
Don Ellenberger, head of multi-sector strategies
Video Transcript
00:02
My name is Don Ellenberger. I'm Head of Multi-Sector Strategies at Federated Hermes.
00:08
In the era of COVID, why own corporate bonds?
00:11
There are really two reasons to own corporate bonds. The first is the Fed. For the first time in history, the Fed has begun buying individual corporate bonds and corporate bond ETFs including so-called fallen angels, bonds have been downgraded from investment grade to high yield. The Fed can do this because they have a super power, no other institution on earth has. They can create an infinite amount of dollars, literally out of thin air. And they're doing that to buy corporates and other bonds to maintain liquidity in the bond market and to tighten spreads, which lowers borrowing costs for companies and helps to support economic growth. And the worse the economy gets, the more the Fed will buy, acting like an automatic stabilizer on the economy and the markets.
01:00
So with the Fed removing the fat tail risk of significant spread widening, corporate bonds should continue to outperform their government counterparts. It also helps that the bar to outperform government bonds is so low right now. The yield on the treasury bond index which is an average of all bonds between one and 30 years is right now at a record low of only 0.4%. So, there's almost no income and very little upside for treasuries unless you think rates in the U.S. will turn negative, but the Fed is in no hurry to take rates negative because that would hurt bank revenue, it would crush money market funds and it just really hasn't worked all that well in Europe or Japan where rates have been negative for several years. And while it's true that the duration of the corporate bond index is at an all time high, interest rate risk isn't as bad as it appears because the Fed simply won't permit rates to rise a lot since that would hurt economic growth and the recovery that the Fed and Congress are trying to engineer.
02:03
In addition to the Fed, what other reasons are there to own corporate bonds?
02:07
Another reasons to like corporate bonds is that there is a mountain of cash sitting on the sidelines just looking for a home. Money supply is growing at a staggering 24% annualized pace. That's the fastest since 1942. 2.6 trillion in dollars poured into money market funds and bank deposits just in the first half of this year. That's dead money with a guaranteed return of nothing over the next two or three years. So, as greed starts to overtake virus fears and investors become more and more desperate for yield, we think that cash will get put to work and credit spreads will grind tighter for the simple reason that you just can't live on 0% forever.
02:52
Disclosure: Views are as of 8-6-2020 and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector. Bond prices are sensitive to changes in interest rates, and a rise in interest rates can cause a decline in their prices. The spread is the difference between the yield of a security versus the yield of a U.S. Treasury security with a comparable average life. Duration is a measure of a security's price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in interest rates than securities of shorter durations. Unlike corporate bonds, government bonds are guaranteed as to the payment of principal and interest. High-yield, lower-rated securities generally entail greater market, credit/default and liquidity risks, and may be more volatile than investment grade securities. Money market securities offer relative safety and stability compared to longer term debt instruments. Bank accounts, unlike bonds, are FDIC insured and offer stable principal. Federated Investment Management Company, 20-30358 (8/20)

DISCLOSURES

Federated Hermes Short-Intermediate Total Return Bond Fund invests in derivative instruments, the use of which involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments.

Bond prices are sensitive to changes in interest rates, and a rise in interest rates can cause a decline in their prices.

High-yield, lower-rated securities generally entail greater market, credit/default and liquidity risks, and may be more volatile than investment-grade securities.

International investing involves special risks including currency risk, increased volatility, political risks and differences in auditing and other financial standards.

Prices of emerging markets securities can be significantly more volatile than the prices of securities in developed countries and currency and political risks are accentuated in emerging markets.

The value of some mortgage-backed securities may be particularly sensitive to changes in prevailing interest rates, and although the securities are generally supported by some form of government or private insurance, there is no assurance that private guarantors or insurers will meet their obligations.

Variable and floating-rate loans and securities generally are less sensitive to interest rate changes but may decline in value if their interest rates do not rise as much or as quickly as interest rates in general. Conversely, variable and floating-rate loans and securities generally will not increase in value as much as fixed-rate debt instruments if interest rates decline.

In addition to the risks generally associated with debt instruments, such as credit, market, interest rate, liquidity and derivatives risks, bank loans are also subject to the risk that the value of the collateral securing a loan may decline, be insufficient to meet the obligations of the borrower or be difficult to liquidate.

Past performance is no guarantee of future results.

Mutual funds are subject to risks and fluctuate in value.

There is no guarantee that any type of investment approach will be successful.

Investors should carefully consider the fund's investment objectives, risks, charges and expenses before investing. To obtain a summary prospectus or prospectus containing this and other information, call us or view the prospectus provided on this website. Please carefully read the summary prospectus or prospectus before investing.

Federated Securities Corp., Distributor

20-40453 (9/20)