Bonds and Interest Rate Movement Analysis/Reminder, Bonds are the Voice of Reason Portion of Portfolio’s, Friend and Foe

Almost every portfolio needs some type of bond investment. Bonds cushion movements during volatile times, kick off regular interest payments usually very frequently and act as a foundation for the entire portfolio.

Bonds are the voice of reason in our portfolios… Much like the friend you had that always calmly mentioned the risk associated with some youthful action that upon second thought was not a good idea…

While a cushion and form of stability during bad times, during higher interest rate times, they act as a small headwind.

Bonds and Interest Rates – Tug of War

As interest rates move up, bonds face a bit of a headwind in the short term, but eventually they catch up to the new higher prevailing interest rate through either maturity in the form of individual holdings or run off in Mutual Fund Holdings.

The following chart show a good example of rates down, bonds up and then the change of rates up and bonds down a bit…

Green = Rates Red=Bond Fund

Just a friendly reminder of short term headwinds by our must have friend, the bond!

Have a Great “Bond v Interest Rates” Reminder Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.



Leave a Reply