The Surprising Benefits Of Rising Interest Rates

Topics:
Commercial Lending
Tags:
Benefit,
Investment,
Interest Rate,
Income,
FinancialCounsel.com,
Financial Services,
Financial Planning,
Finance,
Bond,
Operational Accounting
Source:
FinancialCounsel.com

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Overview: Article discusses the effect of rising interest rates on bond portfolios. It states that bond investors who have made the investment for the income purpose earn more benefits from higher interest rates. Indeed, income generation is perhaps bonds’ biggest advantage over other assets. The fact is, when interest rates rise, the income increases, so long as the portfolio is actively managed to maintain its duration over time. This enables new, higher- interest bonds to be brought into the portfolio, and the resulting benefit is more income. One have to understand that the prospect of rising interest rates that can a boon to income-seeking bondholders who have portfolios of carefully chosen duration and high credit quality, and who make full use of active management.

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Format: PDF | Size: 158KB | Date: Apr 2003 | Pages: 3

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