Rising Rates & Your Account

When bond yields go up, bond prices go down. It’s a time-tested principle, but it’s also one we haven’t experienced much since the pandemic began. 

You could feel the effect of rising yields in a near-term drop in price for your existing bonds. And the first time you might see that change is when your January account statement arrives. 

But it’s important to remember that rising yields can also create new opportunities. New bonds can be purchased with higher yields, and money that is scheduled to be reinvested can also take advantage of the higher yields. That could lead to more income being generated on a regular basis.

Interest rates have been low in previous years, but the Fed has said it was prepared to raise short-term rates in 2022 to help manage inflation which we all know took place. So I’m anticipating some changes in the months ahead for 2023.

Bonds can be confusing, so please reach out if you want a quick refresher. I look forward to hearing from you.

^{If an investor sells a bond before maturity, it may be worth more or less than the initial purchase price. By holding a bond to maturity, an investor will receive the interest payments due plus your original principal, barring default by the issuer. Investments seeking to achieve higher yields also involve a higher degree of risk}