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H&W in the Media

Managers Embrace Defensive Posture in Second Half

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“Since bond values fluctuate inversely to changes in interest rates, a rise in general market interest rates will cause the value of your portfolio to decline,” Walsh said. “This type of bond, priced above 100, will have a lower relative duration than par or discount bonds of the same maturity,” and therefore a lower sensitivity to interest rate changes, he explained.

The kick to maturity, he said, often provides higher rates of return than alternative structures and strategies in the current market.

“Premium bonds with a call option are priced as if the call date was the maturity date,” he said. “With the stated yield to maturity higher than the yield to the call, investors will receive a higher rate of return if their bonds are not called at the first scheduled call date.”

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