Gary, Thank you. I believe the following spells it out.
'Inflation can have a negative effect on fixed-income assets when it leads to higher interest rates. It usually does. Central banks like the U.S. Federal Reserve typically set inflation targets and, when inflation exceeds the desired threshold, they raise interest rates to bring i…
Gary, Thank you. I believe the following spells it out.
'Inflation can have a negative effect on fixed-income assets when it leads to higher interest rates. It usually does. Central banks like the U.S. Federal Reserve typically set inflation targets and, when inflation exceeds the desired threshold, they raise interest rates to bring it under control.
The longer term of a bond, the greater the risk that inflation will hurt the investor's real return.
Fixed-income assets can be found with terms ranging from a few months to five years or more.'
'The longest bond offered by the U.S. Treasury is a 30-year bond.
An investor in a one-year bond is taking less risk that inflation will erode its value before the bond matures.' (Investopedia)
In that regard, coupon clippers are the same as everyone else. Prices go up during periods of inflation. I referred, particularly, to those on a fixed income.
Gary, Thank you. I believe the following spells it out.
'Inflation can have a negative effect on fixed-income assets when it leads to higher interest rates. It usually does. Central banks like the U.S. Federal Reserve typically set inflation targets and, when inflation exceeds the desired threshold, they raise interest rates to bring it under control.
The longer term of a bond, the greater the risk that inflation will hurt the investor's real return.
Fixed-income assets can be found with terms ranging from a few months to five years or more.'
'The longest bond offered by the U.S. Treasury is a 30-year bond.
An investor in a one-year bond is taking less risk that inflation will erode its value before the bond matures.' (Investopedia)
Which is why coupon clippers freak out over inflation.
In that regard, coupon clippers are the same as everyone else. Prices go up during periods of inflation. I referred, particularly, to those on a fixed income.