Floating rate bonds in a rising rate environment

Floating rate loans may do well when rates are rising, but forecasting interest rate movements is notoriously difficult, says Morningstar Investment Management's Shehryar Khan.

Shehryar Khan, CFA 23 June, 2017 | 5:00PM

 

 

Last week, Federal Reserve chair Janet Yellen announced that the central bank was following through on its move toward normalizing lending rates, hiking their overnight rate by 25 basis points. Yellen struck an optimistic tone on growth in the country, and downplayed fears of potential inflation weakness. Similarly, here at home, the Bank of Canada has started talking about the possibility of a rise in interest rates -- an encouraging sign for the Canadian economy. On the flip side, rising rates present a headwind for bonds, and investors may wonder how to position them in a portfolio.

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About Author

Shehryar Khan, CFA

Shehryar Khan, CFA  Shehryar Khan, CFA, is a senior investment analyst for Morningstar’s Investment Management group.

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