Did you know that …..?

  • Many asset class categories are up 20 or 30% for the 2nd quarter of 2009, as of June 10, 2009 (for the period 4/1/09-6/11/09). The media focused great attention on the downward losses of the stock market, but much less has been publicized about the increases since March, 2009.
  • Bill Gross, one of the top active bond managers in the world, recently took over the management of one of his firm’s closed-end fixed income funds, which lost 45% during 2008. The huge loss by the PIMCO High Income Fund is an example of how many fixed income investors, thinking they were invested for stability, got terribly burned in 2008. The fund was invested in high yield corporate bonds, which is another way of saying they were not holding good quality,investment grade bonds of short maturities (which is what we invest in for our clients).
  • Interest rates on US Treasury bonds have increased dramatically in recent weeks and months. relative to the lower levels they were at. For example, since March 11, 2009, the yield on a 5 year bond has increased by almost 1%, from 2% to 3%. The 10 year bond yield has increased from 3% to 4.18%. For investors holding long term bonds, a rise in interest rates will cause a huge loss in the principal value of their bonds. For example, Morningstar reported on June 11 that long-term government bond funds were down more than 19% year to date, through June 10, 2009. We advise our clients to hold short term fixed income investments. Please contact us to review your bond holdings, as investors holding long term bonds may be facing huge principal losses in the future, if interest rates continue to rise.
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