While there are many risks endemic to the bond market, a commonly cited one today is probably duration risk in a rising rate environment. As we saw three years ago, rapidly rising yields can have a profound deleterious effect on bond pricing. Individual bonds, ETFs, CEFs, as well as open-ended mutual funds all got whacked by the end of 2013.
Three years later, however, we find Treasuries back to the level track where we first entered the "taper tantrum" inspired roller coaster hill climb. If you invested money in long-term bonds during the winter of 2013-14, you are likely sitting on some very attractive gains that have eclipsed equity index returns.
10-Year Treasury Since 1-1-13
(click to enlarge)
Whether you should take those gains and move on at this point is somewhat beyond the scope of this article, but clearly, one cannot ignore the potential severe opportunity costs of owning… Read More …