Bond Investing: Inflation, Interest Rate Risk Weaken Corporate Bonds and TIPS
Posted on January 07, 2011 at 05:00 AM EST
To cushion the recession's financial blow and safeguard against shaky global markets, investors over the past few years retreated from stocks and poured billions of dollars into bonds. From January 2008 through June 2010, outflows from equity funds totaled $232 billion, while inflows to bond funds hit a staggering $559 billion, according to the Investment Company Institute (ICI). But as 2010's bull market continued climbing, and the U.S. Federal Reserve maintained its loose monetary policy, bonds' safe haven status faded in the second half of the year. Now analysts are warning investors to escape the investment in 2011, as inflation and interest rates are likely to rise and the bond market is headed for a downturn. But as 2010's bull market continued climbing, and the U.S. Federal Reserve maintained its loose monetary policy, bonds' safe haven status faded in the second half of the year. Now analysts are warning investors to escape the investment in 2011, as inflation and interest rates are likely to rise and the bond market is headed for a downturn.