Friday, December 10, 2010

Rising Interest Rates

The 30 year Treasury bond yields have been bouncing up and down the last few weeks--but mostly up.  On December 1, 4.24%.  The last four days: 4.39%, 4.45%, 4.41%, 4.43%.  I'm pretty sure that we are going to see them a good bit higher, at least for a year or two.  At least I am hoping so.

I have been looking at various bonds.  There are a lot of AA-rated municipal bonds with yields above 6%, and for those prepared to live dangerously, and buy from Third World states like California and Illinois, even above 7%.  As long as you don't buy too much of the bonds from the Third World American states, this isn't too bad: it's a way to sweeten the total yield of your portfolio.  You just need to make sure that your overall bond portfolio is diversified across multiple regions and industries, and is not too heavily invested in heavily unionized companies (or you could get the screw that GM bond holders experienced, courtesy of UAW and its puppet Obama).

So far, I have only had one experience with a company going into bankruptcy whose bonds I held, and that was a company call CIT.  No, that's not Citicorp.  I did not read the details quite carefully enough, and made that mistake.  But even with bankruptcy, all that happened was some of my 7% annual yield bonds turned into stock and bonds that are going to probably end up, by the time the bonds reach maturity and I sell the stock, closer to a 6.5% annual yield.

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