Short Duration vs. Core Bonds in a Rising Rate Environment

April 2011 Investment Perspectives

In today’s low rate environment, interest rate risk has emerged as a primary concern for market participants. Given that the Fed has held interest rates near zero for over two years, many investors are worried about the effect of an increase in rates on their portfolios. As interest rates rise, the discounted value of future cash flows to bond investors falls, causing a drop in the price of bond portfolios.

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