With an inevitable rise in interest rates on the horizon, the following articles are a must read for fixed income investors. Of course we’re biased toward the WFP Income Fund because it has little to no correlation to interest rates, but the strategies discussed are helpful to consider with respect to the other portions of your fixed income portfolio.
How Not To Get Soaked When The Bond Bubble Bursts
SOURCE: Forbes.com | Contributor – Steve Blumenthal
Most investors are unaware and ill-prepared for the impact that rising interest rates will have on their bond funds and ETF investments. There has been an unprecedented period of Fed participation (manipulation) with six years of near zero-percent interest rate policy and trillions of newly created currency.
The Federal Reserve is waging a battle against deflation. Deflation can lead to depression. The Fed’s objective is to create inflation. Our risk is that they do not succeed. Unfortunately, our risk is also that they do succeed.
Managing Your Way In Fixed-Income When Bonds Slump
SOURCE: Forbes.com | Contributor- David Thomas
What will interest rates do? The answer to that question is important to the U.S. economy, the equity markets and especially the fixed-income markets. Many have a thoughtful hypothesis, but who can really forecast the future?
The members and staff of the Federal Open Market Committee should have an idea, since they are the group who actually make the decisions and set the short-term federal funds rate.
The median of the FOMC remains at 25 basis points for all of 2014, moving to 75 basis points for 2015, and out to 175 basis points for 2016 (although with a wide dispersion of opinions from 50 to 425 basis points). The “longer run” which goes out past 2016 is a fairly tight consensus of a 400 basis point fed funds rate.