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Managing Through A Rate Rise With Bank Loans

By DailyAlts Staff

Fixed income investors are in a quandary: With interest rates at historic lows, bonds are generating anemic income; and while the Federal Reserve promises to be patient, the central bank is still expected to begin raising rates later this year. Since higher interest rates paid on newly issued bonds make previously issued bonds with lower interest rates less attractive, the price of bonds tend to adjust and go down when interest rates go up - and with coupon payments already so low, yield income is unlikely to make up for capital losses, as it has in the past.

Senior Bank Loans

So what are income-oriented investors to do? One option is senior secured bank loans, a class of debt with very attractive features for the current environment. For starters, bank loans pay a variable interest rate, which means their coupon payments should go up if the Federal… Read More …