VGLT - Rates And Reality Series: Why The Next 10 Years May Be Better Than The Last
In this three-part series, Matt Tucker examines the relationship between interest rates and bond returns. His final post looks at how investors should factor the long-term rate environment into their plans.
In our previous post, we showed what drives bond returns-namely a combination of the initial bond yield, price changes due to rate movements, and the reinvestment of coupons. For long-term investors, rising rates may actually be beneficial because they allow you to reinvest cash flows at higher yields in the future.
Most bond investors fall into the long-term camp. They are using bonds as