72 Basis Points: Increase in interest rates it would take to eliminate the total return for the 5-10 year credit component index of the Barclays US Aggregate Index
It's a very complex and different fixed income world than it was just 5 or 6 years ago. Conventional fixed income investments are offering historically low yields, a new risk for investors to consider. It would take very little in the way of a rate increase for investors to lose their total returns across many traditional fixed income sectors. For example, look at the 5-10 year credit component index of the Barclays US Aggregate Index. It would only take a 72 basis point increase in interest rates to eliminate the total return of that index. Similarly, agency mortgage-backed securities could withstand only a 36 basis point rise in rates before the sector total return is eroded to zero. Investors should consider the way they think about fixed income investing and broaden their vision.
Source: BlackRock, October 2012
Prepared by BlackRock
Delivered courtesy Joel W. Grams, CRPC®, CLTC,
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