As a result, we believe investors would be well served to reduce interest rate risk in their bond portfolios. As we have mentioned previously, we believe that the current risk/reward profile favors positions that will benefit from a rise in rates. With yields in most fixed income sectors near one-year lows, we believe that now may be a prudent time to reduce risk.
1Board of Governors of the Federal Reserve System, Federal Open Market Committee. 7/30/14.http://www.federalreserve.gov/newsevents/press/monetary/20140730a.htm
2Rich Miller and Michelle Jamrisko, “Yellen Jobs Dashboard Shows Rate Rise Far on Horizon: Economy,” Bloomberg, 4/2/14.
Important Risks Related to this Article
Fixed income investments are subject to interest rate risk; their value will normally decline as interest rates rise. In addition when interest rates fall income may decline.