In a laddered portfolio, maturing bonds and coupon payments are typically reinvested in bonds at the ladder's longest rung, which usually offers higher
yields in normal market conditions.
Not exact matches
Domestic bond
market volatility also decreased last year with 10 - year Treasury
yields trading
in a tighter - than -
normal range.
In fact, one observational system of which I am aware (i.e., the TAP System for Teacher and Student Advancement) is
marketing its proprietary system, using as a primary selling point figures illustrating (with text explaining) how clients who use their system will improve their prior «Widget Effect» results (i.e.,
yielding such
normal curves; see Figure below, as per Jerald & Van Hook, 2011, p. 1).
Phase 1: the
market is offering a bargain
in yields relative to
normal default costs, and terms & conditions are firm.
Phase 3: the
market is fully priced
in yields relative to
normal default costs, and terms & conditions [covenants] are soggy.
Phase 2: the
market is fully priced
in yields relative to
normal default costs, and terms & conditions [covenants] are firm.
The income portion combines some low - cost «
normal» stuff with an awful lot of abnormal investments
in emerging
markets, convertibles, and called high -
yield bonds.
During the past several years, Federated has had to regularly issue money
market fund fee waivers
in order to keep funds at a neutral or positive
yield, versus historically —
in a more
normal historical interest rate environment — being able to count on money
market funds to generate higher profits.
Thus
in normal markets if bond
yields rise they become more attractive than risky stocks, so money shifts.
So if you don't sell shares, and the
markets don't go down, then there are no draw - downs at all - just the opposite most of the time (
in «
normal times» - when bonds actually
yield something - like they will
in a few years or so if interest rates keep going back up to
normal pre-meltdown levels).