The muni market seems to be returning to normal after major outflows last summer, though several potential hot-button issues could still spook investors. We don’t think these represent major risks to market returns or properly positioned portfolios. (more…)
“Keep Calm and Carry On” reads a popular World War II–era British motivational poster. We think the first half of the slogan is good advice for bond investors in today’s uncertain markets, but we’d substitute the second with “Go Global.”
US interest rates are likely to head up gradually over the next several years, now that the long tailwind from a three-decade-long rate decline has subsided. With bonds still an important part of many portfolios, what should investors be thinking about?
Bond investors are used to managing interest-rate risk and credit risk. But the financial crisis should have taught us that there are times when liquidity risk can be just as important to manage. Now is one of those times.
Pension fund managers, like many investors, have historically paid a premium for liquidity. Lately they’ve started to realize that liquidity can be an illusion—but it can also be an opportunity.
By Jeff Skoglund (pictured) and Shrut Vakil of AllianceBernstein (NYSE: AB)
US banks have come a long way since the financial crisis, and that’s good news for fixed-income investors. We think better fundamentals and stricter regulations are creating a good formula for banks’ preferred securities.
To protect their portfolios from rising interest rates and volatility, many high-yield investors have headed for short-duration strategies. We think some of the more popular approaches may expose investors to bigger hazards than they realize.
High-yield bonds’ attractive income has made them popular in today’s low-rate environment. But market complacency has caused callable-bond investors to ignore a lurking risk: duration extension in a rising-rate scenario.
By Doug Peebles (pictured) and Ivan Rudolph-Shabinsky of AllianceBernstein (NYSE:AB)
The US Fed has said it will almost certainly boost short-term interest rates by 2015, and many bond investors are focused intently on managing the risks of rising rates. But it’s also important to recognize that there are benefits. (more…)
We think investors who build laddered portfolios to protect against rising rates will be disappointed—by locking in low yields with traditional ladders or by hidden risks of higher-yielding ladders. In our view, actively managed portfolios are better able to take advantage of changing markets.