The purpose of this post is not to suggest that bond yields won't rise in the near or distant future, or to make counter claims about rising yields and accounts holding bonds...what I seek to do here is offer some context and perspective.
The main takeaway here is that interest rates are volatile, and that volatility impacts the value of portfolios holding bonds. What it doesn't mean is that bonds are necessarily too risky or a bad investment for certain clients; again, every investment option should be evaluated based on expected risks and returns within the investor's specific goals and time horizons.
A couple of additional considerations, based solely on math:
- All else held constant, bonds with shorter terms will be less volatile (to the up or downside)
- All else constant, bonds with higher coupon rates will be less volatile
And one consideration based on the nature of the markets:
- the lower quality the bond (high yield or junk bonds are on the opposite end of the spectrum from US Treasuries or high grade corporate bonds), the less sensitive the price / yield is to market rates and more sensitive they are to economics. Put another way, lower quality bonds tend to show more correlation to the stock market than to treasury rates.