Elder Abuse
If Interest Rates Rise, What Happens to Bonds?
Submitted by Ferguson Financial Inc. on May 7th, 2015
Will bond investors soon suffer major losses? In the last few years, Bill Gross, Jim Rogers and other pundits have warned of a bond bubble. While it has yet to occur – the broad bond market yielded an annualized 4.42% from 2010-2014 – the threat remains.1,2
Quality bonds have a place in a portfolio, but many investors are directing their money elsewhere. Seemingly everyone believes the Federal Reserve will raise interest rates later this year, with bonds set to lose market value. Assuming the economy stays healthy and appetite for risk stays strong, what will happen to bonds and bond funds when rates begin to climb?
