Finra warns on bonds

Cautions about duration risk

Feb 14, 2013 @ 4:13 pm

By Dan Jamieson

Finra warned investors today that if interest rates rise - as most market pros expect - bond investors could be slammed by long duration.

In an investor alert, the Financial Industry Regulatory Authority Inc. told investors that in the event of rising interest rates, “outstanding bonds, particularly those with a low interest rate and high duration may experience significant price drops.”

A bond fund with 10-year duration will decrease in value by 10% if rates rise one percentage point, the alert warns.

Bond-fund investors can find measures of duration in a fund's fact sheet, Finra says, and individual bond investors can check with their investment professional, the bond's issuer or use an online calculator to get the figure.

Short duration doesn't mean risk-free, the alert says.

“Bonds and bond funds are subject to inflation risk, call risk, default risk and other risk factors,” the warning says.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

INTV

Why some retirement plan advisers think Fidelity is invading their turf

InvestmentNews editor Frederick P. Gabriel Jr. and reporter Greg Iacurci talk about this week's cover story that looks at whether Fidelity Investments is stepping on the toes of retirement plan advisers.

Latest news & opinion

Broker protocol: Indecision over recruiting agreement is rampant

Ruckus over recruiting agreement has even wirehouse lifers wondering if it's time

Cetera reportedly exploring $1.5 billion sale

The company confirmed it's talking to investment bankers to 'explore how to best optimize [its] capital structure at lower costs.'

SEC Chairman Jay Clayton outlines goals for a new fiduciary standard

Rule should provide clarity on role of adviser, enhanced investor protection and regulatory coordination.

Advisers bemoan LPL's technology platform change

Those in a private LinkedIn chat room were sounding off about fears the independent broker-dealer will require a move to ClientWorks before it is fully ready.

Speculation mounts on whether others will follow UBS' latest move to prevent brokers from leaving

UBS brokers must sign a 12-month non-solicit agreement if they want their 2017 bonuses.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print