With interest rates almost certainly on the rise within the next 12 months, is the game up for bonds as an asset class?
As an Investment Week reader, I am sure you need no lectures on the inverse relationship between rising interest rates and plunging bond prices. Perhaps the more important issue is the maturity and thus the duration issue – the longer the maturity of the bond, the greater the effect of rate changes, so make sure you know the average duration of your chosen bond fund. With that concept of maturity comes a whole bunch of other terms bandied about by bond fund managers – they will move along that duration curve, they watch out for flatteners, and they might even indulge in the odd barbell. ...
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