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Fidelity Viewpoints® and Analysis 2011 was a year of startling volatility. U.S Treasuries served as a safe haven during repeated "risk off" episodes, and were the best performing asset class in the investment grade bond universe.  In December 2010, a high-profile prediction of a wave of defaults in the municipal bond market began to roil the markets.  After a year of volatility fueled by the euro zone’s sovereign debt crisis, S&P’s downgrade of U.S. long-term debt, and the Federal Reserve’s “Operation Twist,” bond investors enter 2012 facing more unknowns. Third Party Market analysisProvided by BlackRock®
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In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible. Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss The municipal market can be affected by adverse tax, legislative or political changes and the financial condition of the issuers of municipal securities. Interest income generated by municipal bonds is generally expected to be exempt from federal income taxes and, if the bonds are held by an investor resident in the state of issuance, state and local income taxes. Such interest income may be subject to federal and/or state alternative minimum taxes. Investing in municipal bonds for the purpose of generating tax-exempt income may not be appropriate for investors in all tax brackets. Generally, tax-exempt municipal securities are not appropriate holdings for tax advantaged accounts such as IRAs and 401(k)s. Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully. |
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