The Federal Reserve continued their consistency and transparency with one interest rate increase in September, projecting one more increase before year-end, and two increases in 2019. As long as the economy continues to hum along, the market is fully anticipating these increases and they have been priced into securities.
Increasing rates are generally good for bond holders, as long as the rate rises are anticipated and steady. Those increases eventually lead to increased bond yields, which will be valuable going forward. As we said in our bond piece last month, historically 90% of bond returns come from their interest payments and only about 10% from price appreciation when interest rates eventually decline. Keeping those consistent interest receipts in mind helps when bond values dip (along with the fact that you will eventually receive the bond's principal payment at maturity).
Bond returns in Q3 were slight, but at the end of the day they prove their worth with their relatively consistent yields and low volatility. In a world where stock market returns can vary widely in a short three month period, bonds are the sturdy boots we can depend on when the trails get rocky.