Different sectors of the bond market outperform as the Fed
adjusts interest rates over time

Fed funds effective rate, 1/31/01-12/31/20

Source: Federal Reserve.

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Learn more about fixed income investing

Alternating bond market leadership

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Where are rates headed next?

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Putnam’s Fixed Income Outlook

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Consider these risks before investing: Emerging-market securities carry illiquidity and volatility risks. Lower-rated bonds may offer higher yields in return for more risk. Funds that invest in government securities are not guaranteed. Mortgage-backed investments, unlike traditional debt investments, are subject to prepayment risk, which means that they may increase in value less than other bonds when interest rates decline and decline in value more than other bonds when interest rates rise. Bond investments are subject to interest-rate risk (the risk of bond prices falling if interest rates rise) and credit risk (the risk of an issuer defaulting on interest or principal payments). Interest-rate risk is generally greater for longer-term bonds, and credit risk is generally greater for below-investment-grade bonds. Risks associated with derivatives include increased investment exposure (which may be considered leverage) and, in the case of over-the-counter instruments, the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. Unlike bonds, funds that invest in bonds have fees and expenses. The value of investments in the fund's portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political or financial market conditions, investor sentiment and market perceptions, government actions, geopolitical events or changes, and factors related to a specific issuer, geography, industry or sector. International investing involves currency, economic, and political risks. These and other factors may lead to increased volatility and reduced liquidity in the fund's portfolio holdings. Our investment techniques, analyses, and judgments may not produce the outcome we intend. The investments we select for the fund may not perform as well as other securities that we do not select for the fund. We, or the fund’s other service providers, may experience disruptions or operating errors that could have a negative effect on the fund. Floating-rate loans may reduce, but not eliminate, interest-rate risk. These loans are typically secured by specific collateral or assets of the issuer (so that holders of the loan, such as the fund, have a priority claim on those assets in the event of the issuer's default or bankruptcy). The value of collateral may be insufficient to meet the issuer's obligations, and the fund's access to collateral may be limited by bankruptcy or other insolvency laws. You can lose money by investing in the fund.

Data is historical. Past performance is not a guarantee of future results. Emerging-market bonds are represented by the JPMorgan EMBI Global Diversified Index, which is an unmanaged index of external debt instruments (including Brady bonds, loans, Eurobonds, and local market instruments) in the emerging markets. Investment grade bonds are represented by the Bloomberg Barclays U.S. Aggregate Bond Index, an unmanaged index of U.S. investment-grade fixed income securities. Mortgage-backed bonds are represented by the Bloomberg Barclays U.S. MBS Index, an unmanaged index of agency mortgage-backed pass-through securities (both fixed-rate and hybrid ARM) guaranteed by Ginnie Mae, Fannie Mae, and Freddie Mac. High-yield bonds are represented by the JPMorgan Developed High Yield Index, an unmanaged index of high-yield fixed income securities issued in developed countries. Municipal bonds are represented by the Bloomberg Barclays Municipal Bond Index, an unmanaged index of long-term fixed-rate investment-grade tax-exempt bonds. Cash is represented by the ICE BofA U.S. 3-month T-Bill Index, an unmanaged index used as a general measure for money market or cash instruments. Treasury bonds are represented by the Bloomberg Barclays U.S. Long Treasury Index, an unmanaged index of U.S. Treasury securities with maturities of 10 years or greater. Bank loans are represented by the S&P/LSTA Leveraged Loan Index, an unmanaged index of U.S. leveraged loans. International bonds are represented by the Bloomberg Barclays Global Aggregate Ex-U.S. Index, an unmanaged index of global investment-grade fixed income securities, excluding those from the United States. Convertible bonds are represented by the ICE BofA U.S. Convertible Index, an unmanaged index of high-yield U.S. convertible securities. You cannot invest directly in an index. Past performance is not is not a guarantee of future results.

ICE Data Indices, LLC (ICE BofAML), used with permission. ICE BofAML permits use of the ICE BofAML indices and related data on an "as is" basis; makes no warranties regarding same; does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the ICE BofAML indices or any data included in, related to, or derived therefrom; assumes no liability in connection with the use of the foregoing; and does not sponsor, endorse, or recommend Putnam Investments, or any of its products or services.

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