CHICAGO, June 30 (Reuters) – Contemplating the end of a
30-year bull run in bond prices is a bit like waiting to go to
the dentist for some long-needed procedure. You know it needs to
happen, but you procrastinate.
The end of the bond rally has been telegraphed for more than
a year, so it needn’t be painful if you prepare for it now.
Some of the conventional wisdom on avoiding all bonds except
for short-maturity issues may be flawed. There are alternatives
that can make sense while producing modest yield.
If you want to sacrifice yield now for protection later,
consider a floating-rate bond fund that invests in securities
with variable interest rates. Here are two funds to think about:
* The SPDR Barclays Capital Investment Grade Floating Rate
ETF, for example, has little risk of losing money when
rates rise. It gained nearly 1 percent last year as the Barclays
U.S. Aggregate Bond Total Return Index – a benchmark for the
lion’s share of the U.S. bond market – lost 0.2 percent. It
charges 0.15 percent for annual management expenses.