Though they’ve defied expectations this year, higher interest rates appear to be all but inevitable. Investors need to take measure of the rate sensitivity in their portfolios—and stay agile—to negotiate the rough market crosscurrents a rate reversal may bring.
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…)
In early 2013, we urged investors to take a hard look at the interest-rate risk in their bond portfolios. If they didn’t do it then, they have a chance to do it now. (more…)
Investors seeking more robust returns in a lower-interest-rate environment often look to high-yield bonds for answers. But it’s critical that they don’t reach too far down the credit spectrum in search of higher yields—as tempting as it may be. (more…)
When the Fed does eventually start raising interest rates, at AllianceBernstein we don’t expect to see bonds experiencing the dire scenarios of 1981 or 1994. Instead, the 2003–2006 period of slow and measured rate normalization seems more likely. But it’s not a perfect match, and we do see some important investment factors to consider. (more…)
Investors often ask us how they should think about bond markets in a time of rising yields. Are we facing a situation similar to 1994? Or worse, could it be like 1981, when five-year US Treasury yields soared to 15%? Our answer often surprises them: we don’t think it’s either. (more…)
Ashish Shah (pictured) and Ivan Rudolph-Shabinsky
Investors who chose high-yield bank loans over high-yield bonds earlier this year, expecting to be insulated against rising rates, might be surprised to find that bonds might have worked out better. (more…)
By Chris Marx (pictured) and Alison Martier
A reader of our recent blog post about stocks in rising-rate environments asked us for more details on the magnitude and timing of any stock-market sell-offs during those periods. They were uncommon but ugly, so we thought our answer warranted another post. (more…)
After the bond market’s stumble last quarter, defending against rising rates has moved front and center for many investors. One approach that has been effective over time has been exposure to credit-oriented sectors and strategies. (more…)