Tags: Bond | Investors | turbulence

Expert: Brace for Rough Ride, Bond Investors

Tuesday, 01 Jun 2010 01:10 PM

Debt market are becoming turbulent as yield spreads widen and debt becomes more difficult for some companies to finance, says Charles Rotblut, CFA (Chartered Financial Analyst).

What this means for individual investors depends on whether they are actively trading bonds or are maintaining an allocation for income and diversification, Rotblut says.

“If you are an active trader, the reality is that any adjustments should have already been made,” he writes in Forbes magazine.

“Conversely, if you are investing in bonds for allocation and income reasons, there is nothing to do other than routine analysis of your portfolio," he says.

"Keep risk within your tolerance levels and sell any bonds that truly warrant selling, but do not change your bond strategy just because the market has become more volatile.”

Compared to 2008, bond market numbers aren’t horrific, Rotblut points out, and spreads remain well below the levels seen in the midst of the credit crunch.

“Nonetheless, widening credit spreads and canceled debt offerings are not the types of things we want when the economy is trying to recover from a recession caused by a financial crisis,” he observes.

Treasuries rose 5 basis points last week to 193 basis points, or 1.93 percentage points, Bloomberg Business Week reports.

The spread, which peaked at 511 on March 30, 2009, widened from this year’s low of 142 on April 21. Average yields rose to 4.06 percent, the highest based on weekly closes since the period ended March 5.

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Debt market are becoming turbulent as yield spreads widen and debt becomes more difficult for some companies to finance, says Charles Rotblut, CFA (Chartered Financial Analyst). What this means for individual investors depends on whether they are actively trading bonds or...
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2010-10-01
 

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