Investors are probably tired of hearing warnings that bond exchange traded funds could get dinged by rising interest rates. Higher bond yields will have a significant effect on stock ETFs as well.
“While a disappointing employment report tempered fears of an imminent bond market meltdown, many equity investors are still concerned over the potential impact of rising rates on stocks,” said Russ Koesterich, iShares Global Chief Investment Strategist, in a recent note.
Treasury yields have been trending lower since mid-March following a brief spike. Bond prices and yields move in opposite directions.
The main question for investors is whether the three-decade rally in U.S. government debt can continue. [ETF Moves to Make if Interest Rates Rise]
“Putting the current yield environment in context, even after removing the 1970s and early 1980s— a period of unusually high nominal yields— the long-term average yield for the 10-year note is still 5.25%, more than twice today’s level,” said the iShares strategist.
Historically, stocks have not been hurt when rates rise from “the absurdly low to merely low,” according to Koesterich.