How Should Bond Investors Prepare for Fed Tightening?

For much of the past two years, the bond markets have confounded observers who were forecasting a rise in yields. As the Federal Reserve gears up for an inevitable interest rate hike, though, the pressure will likewise be dialed up on fixed income.

“There’s nothing on the traditional bond front that I don’t think stinks,” says Matthew Tuttle, manager of the $42.1 million Tuttle Tactical Management Multi-Strategy Income ETF at Etfis Capital in New York. “Bonds have been in a bull market for 30 years, and that can’t last forever.”

美联储椅珍妮特·耶伦已经暗示了这一点central bank will hike rates- 今年，如果经济条件继续加强，今年慢慢地。自2008年12月以来，美联储联邦资金率的目标已达到零至0.25％的历史率低。失业率是一项重点美联储考虑，六月跌至七年截至5.3％的七年。“如果它逐渐发挥作用，这将是很好的，”顾问资本管理的首席投资官Charles Lieberman表示，Ridgewood的10亿美元注册投资顾问，新泽西州。“但风险是，它不是因为劳动力市场的逐步收紧。”

Although some economists believe the Fed will boost rates just once this year, Michael Cloherty, head of U.S. rates strategy at RBC Capital Markets in New York, sees two hikes. According to him, the Treasury market is pricing in a peak federal funds rate of 2 percent, he says. “But the Fed always overshoots in tightening and easing,” he adds. “The market isn’t pricing in nearly enough risk for a bigger hike.” Cloherty expects economic growth of 2.75 percent for the second half of the year, compared with an average rate of 1.5 percent for the first two quarters. That will help push inflation a bit higher, he says: “There won’t be massive inflation, but with the ten-year Treasury yield not far above 2 percent, you don’t need massive inflation to make that look like a bad investment.” Cloherty sees the ten-year Treasury yield climbing to 2.7 percent at year-end, from 2.26 percent as of August 6, and then to 3.5 percent by the end of 2016. The market hasn’t seen yields that high since the spring of 2011, but that is still a low level by historical standards.

利伯曼说，美联储的收紧将证明对转向资产类别以保护资产的债券投资者的债券投资者令人不安。“他们会发现他们也可以在债券中有效地减少金钱。”

The problem is magnified for investors who buy bond funds rather than the bonds themselves. An investor holding an investment-grade bond to maturity should receive the bond’s par value. But if bond prices fall for a sustained period, there is no guarantee a bond fund will rebound to any set price — let alone the cost of purchase. “As a bond fund investor, you may not be protecting your capital, and fees could be cutting into your income,” says Mick Heyman, executive and sole owner of Heyman Investment Counseling, a $35 million RIA in San Diego.

A bear market in bonds could hit retirees particularly hard, as many of them have built their portfolio around the asset class. “All the advice we give people near retirement is to reduce risk based on bonds’ past performance,” says Tuttle. “If that [past performance] doesn’t hold, bad things will happen.” And he thinks bad things will happen. “When the bond bubble bursts, it could be worse than stocks,” Tuttle says.

那么，寻求安全收入的投资者是什么？一些专家推荐股息库存，首选股票，房地产投资信托和硕士有限伙伴关系。可以确定，从这些投资的收入保证，投资的价值很容易下降。Heyman说，有很长一段时间的地平线和耐受性的容差，可以很好地考虑蓝筹股股息股票。在某些情况下，将投资者提供超过3％的产量，潜在资本升值。为了肯定，主要关注保护资金的人应考虑阶梯或高质量的市政债券，以及各种情况，他建议。在一个上升的利率环境中，可以以更高的收益率投入成熟债券的收益。而且，只要投资者不购买高于标准的债券，他们应该避免校长损失。

Lieberman hasn’t given up completely on bonds either. “The most effective strategy is to shorten maturities,” he says. “The shorter the maturity, the less sensitive a bond portfolio has to rising interest rates.” The average duration of his firm’s fixed-income portfolio is only one year, which Lieberman says is a testament to his firm’s concern about risk.

Overall, though, the future looks bleak for bonds, many investors say. Problems like Greece’s debt crisis and中国股市暴跌can cause a brief flight to Treasuries. “Longer term, I don’t see how the math works,” Tuttle says. “The Fed has stolen future returns for bondholders. I would be shocked if my view were to change in the next year or two.”

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