Radio Show #120: Bond bloodbath


The Federal Reserve spoke and the bond market was not amused. Chairman Bernanke said that if the central bank’s projections were correct and the economy continues to improve, the Fed could begin to taper its bond purchases at the end of this year; and the program could conclude in mid-2014. Bond yields spiked to 2.5 percent and bond prices, which move in the opposite direction, sank.

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The rise in 10-year Treasury bond yields from 1.6 percent in the beginning of May to a 15-month high of 2.5 percent in mid-June might not seem like a big deal – just 0.90, right? But it’s important to realize that it’s a 56 percent move in just 7 weeks!

Since a one percent increase in yields could cause a bond fund to decline by 5 to 10 percent, depending on the type of bonds you own, the questions about bonds are starting to pour in. Summing up most of those e-mails was Brian, who knows he has to rebalance, but is fearful of the bond market.

The retirement planners were out in force: Patricia from MO is trying to plan for an adequate, steady income if her husband predeceases her; Gary in NY is wondering whether to take 20 percent of his $1 million retirement savings and put it into a guaranteed annuity; Mike from CA wants to know if his nest egg is sufficient to supplement his pension; and Doug from MD is contemplating retirement, after a big change in his life.

We fielded home purchase and mortgage questions from Daniel in Arkansas and Stephanie in Texas; soothed Margaret and Jan, who are both worried about the stability of Social Security (fear not!); and chided Jason for wanting to use off the shelf software to save money on estate planning - bad idea!

Thanks to everyone who participated and to Mark, the BEST producer in the world and Christina, who is vying for "Intern of the Year". If you have a financial question, there are lots of ways to contact us:

  • Call 855-411-JILL and we'll schedule time to get you on the show LIVE