When investors open up their brokerage mid-year account statements, they’re now seeing something they haven’t seen in a while: lower bond values.
Over the past three months, the yield in 10-year U.S. Treasury bonds has shot up 34% to 2.48%.
Besides causing bond portfolios with long-term maturities a world of hurt, mortgage rates have shot up too. According to Freddie Mac, the average rate for a 30-year fixed rate home loan is near 4.5%, a two-year high.
Advisors can help shield their clients from the fierce attack of higher rates by sticking with bonds and bond funds that have shorter maturities. The iShares Barclays 7-10 Year Treasury Fund (IEF) holds a portfolio of U.S. Treasuries with 7-10 year maturities. The Vanguard Short-Term Bond Fund (BSV) sticks with Treasuries and investment grade debt with 1-5 year maturities.