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Unformatted text preview: reprieve for bond investors. But even if rates stay low, counter the bond bears, the bubble is getting bigger -- and more dangerous. Most bonds are priced relative to Treasurys, so if the rates on Treasurys are too low, then so are the rates on everything else. If and when Treasury yields start moving upward, the losses will have a ripple effect, says Elaine Stokes, co-manager of the $21 billion Loomis Sayles Bond fund. For bond investors, the damage could come in two waves: in the near term if rates rise to reflect positive economic growth, and again in the longer term as interest rates climb again. If rates rise, bond holders could be forced to sell their bonds for less than what they paid (or at least less than what they are worth today). Longer-dated bonds are the most vulnerable, because the longer an investor has to wait for his bond to mature, the greater the chance that an increase in rates could diminish the value of that bond....
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This note was uploaded on 02/22/2012 for the course MANEC 453 taught by Professor Jerrynelson during the Winter '10 term at BYU.
- Winter '10