You have probably heard the phrase that interest rates and bond prices move in opposite directions. That is, as interest rates rise bond prices are expected to fall and vice versa. However, since the start of 2021 we have observed a steady rise in international rates, yet corporate bond prices continue to increase. How can this be? Before we try to address this apparent paradox, let us explore the reasons behind the current rate moves (particularly in the US) and whether this should be cause for serious concern for bond investors. We will also look at where we can still find lucrative investment opportunities.
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