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How Investors Can Cope With Bond Market Declines


Look at it this way. The Fed has already told us it expects that within the next year or two, the fed funds rate will exceed 2.25 percent. So the yield on two-year Treasurys has more than tripled since Dec. 31, rising to about 2.45 percent from 0.73 percent. Because prices move in the opposite direction from interest rates, the value of Treasurys has plummeted.I keep hearing about “inversions” in the bond market. What’s that all about?While the Fed has intervened extensively in the entire bond market, it has less influence over longer-term bonds — those for, say, five or 10 or 30 years. Their yields haven’t risen as rapidly as those for shorter-term securities. In fact, some shorter-term rates have already exceeded those for longer-term bonds. When that happens, as the jargon goes, there is a “yield curve inversion.”Inversions suggest that traders doubt that the Fed will be able to keep increasing interest rates because the economic impact will b …

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