When rates climb, think the short game

Conventional thinking is that rising rates are bad for bonds. In the current market environment, though, rates have risen for the right reasons—improving economic fundamentals—and it doesn’t have to mean a negative run for fixed-income investors.

A rising-rate environment may lead some investors to reconsider their core bond holdings, but timing the bond market is as unwise a pursuit as timing the stock market. Many fixed-income strategies have fared well in periods of increasing rates. However, those with a shorter duration may pose less risk in times of rising interest rates, historically providing particularly compelling options in a diverse portfolio.

Federated fixed-income products to consider as rates rise:

Floating Rate Strategic Income Fund Federated Floating Rate Strategic Income Fund offers a unique, multi-sector approach, investing in floating-rate instruments that pay interest that increases or decreases with changes in market rates.
Floating Rate Strategic Income Fund Federated Municipal Ultrashort Fund seeks to provide income exempt from federal regular income tax, generally trying to maintain a low degree of fluctuation by limiting the portfolio duration to one year or less.
Ultrashort Bond Fund Federated Ultrashort Bond Fund pursues a total return consistent with current income by investing primarily in a diversified portfolio of investment-grade debt securities. In an effort to combat rising rates, it maintains an average effective duration of a year or less.

Why ultrashorts in this environment?

Play Video "Ultrashort bond funds have a place in pretty much every portfolio, but when interest rates are rising they become particularly valuable. "

Senior Portfolio Manager Randall Bauer

Looking for more fixed-income options?

Consider Federated's Total Return Bond fund, Federated’s Institutional High Yield Bond Fund, Federated’s Government Ultrashort Duration Fund as well as our entire fixed-income lineup.