Don’t panic about rising rates
Interest rates rose sharply and the yield curve steepened in the first quarter, resulting in negative returns for many bond sectors. While rising rates do cause bond prices to decline, higher yields may provide benefits to diversified portfolios over time. We continue to favor credit sectors in this environment, and active managers can take advantage of these opportunities to increase income and build return.
- While rising yields cause bond prices to fall in the short term, higher rates can be beneficial over the medium term.
- Higher yields create more income, and an improving economy generally benefits credit sectors.
- The steepening yield curve also creates opportunities for active managers to position along the yield curve to add incremental alpha.