The Potential Risks of Fixed Income.

60 basis point range: August volatility of 10-year interest rates

       Volatility in August with 10-year interest rates moving in a 60 basis point range (30 higher and 30 lower) illustrates the potential risks in fixed income. However, flat August returns for core fixed income (+.07% for Barclays US Aggregate Index) underscores the poor risk-reward we see in these sectors. At record low interest rates and record high interest rate sensitivity, our forecast for even a modest rise in interest rates negates most of the return potential of the core fixed income asset class through the end of the year.

       In such an environment, we continue to advocate reducing fixed income holdings focused on interest rate risk: core mutual funds with Aggregate benchmarks, Treasury and Agency exposures in favor of sectors or segments with greater credit risk such as high grade and high yield corporate bonds.

Source: BlackRock, August 2012

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Prepared by BlackRock Delivered courtesy Joel W. Grams, CRPC®, CLTC,Registered Representative, Financial Planner, 212 Capital Group 38 Main Street Suite 360, Westlake Ohio 44145(440) 835-4501 Ext 17, jgrams@212capitalgroup.com