WSJ: Pros and Cons of Ultra-Short-Term Bond Funds

Tuesday, 12 Aug 2014 11:13 AM

By Dan Weil

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
Ultra-short-term bond funds offer investors higher yields than do most money market funds, without requiring you to lock up your money like you would with a certificate of deposit or to take the same interest-rate risk that you would with a long-term bond fund.

The ultra-short-term funds have an average yield of 0.7 percent, according to The Wall Street Journal.

But the share prices of ultra-short-term bond funds will still suffer when the Federal Reserve raises interest rates, experts tell the paper. Many economists expect the Fed to do so in the second or third quarter of next year.

Editor’s Note:
5 Shocking Reasons the Dow Will Hit 60,000


Nonetheless, investors are buying ultras-short bond funds now and asking questions later. In the first half of the year, these mutual funds saw a $2.5 billion inflow, according to Morningstar. The funds generally hold debt with a maturity of up to a year.

As for the danger, "the risk is that people think they're taking even less risk [than they really are] for these pretty measly yields," Sarah Bush, an analyst at Morningstar, tells The Journal. "These are not money market funds. You could see modest losses."

As for long-term interest rates, 10-year Treasury yields have slid to a one-year low recently, as traders and investors seek a safe haven from the turmoil in the Mideast and Ukraine.

"The geopolitical environment has really overwhelmed everything else," Christopher Sullivan, chief investment officer at United Nations Federal Credit Union, tells Bloomberg. "These problems are . . . likely to be here for some time, and that has sent investors looking for safety."

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

Related Stories:

© 2014 Moneynews. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
You May Also Like

Drug, Medical Device Firms Pay Billions to US Physicians, Hospitals

Tuesday, 30 Sep 2014 17:33 PM

U.S. doctors and teaching hospitals received $3.5 billion from pharmaceutical companies and medical device makers in the . . .

Stocks Fall as Global Shares Cap Quarterly Slide; Oil Sinks

Tuesday, 30 Sep 2014 16:37 PM

U.S. stocks fell, with global equities capping the worst quarterly drop since 2012, as energy producers sank with the pr . . .

Harvard Study: Treasury, Fed Tactics Clashed During Crisis

Tuesday, 30 Sep 2014 13:10 PM

Policies pursued by the U.S. Treasury during the 2007-2009 financial crisis undercut the Federal Reserve's efforts to st . . .

Most Commented
Top Stories

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved