Rocky Road Ahead for Bond Investors

Retirees need to guard their bond holdings against higher rates and inflation while squeaking out a decent yield—a tall order when many parts of the bond market look expensive.

(Image credit: kristian sekulic)

For retirees with bond-heavy portfolios, 2016 came to an unsettling end.

The bonds that many retirees see as their safest holdings—Treasuries and high-quality municipals—sold off sharply after the U.S. presidential election. Expectations that the incoming Trump administration will boost infrastructure spending and cut taxes sparked inflation fears, and the 10-year U.S. Treasury yield jumped from 1.8% before the election to about 2.4% at the end of November. (Bond prices and yields move in opposite directions.) More pain came in December, as the Federal Reserve raised interest rates and central bankers signaled that they may hike rates three times in 2017.

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Eleanor Laise
Senior Editor, Kiplinger's Retirement Report
Laise covers retirement issues ranging from income investing and pension plans to long-term care and estate planning. She joined Kiplinger in 2011 from the Wall Street Journal, where as a staff reporter she covered mutual funds, retirement plans and other personal finance topics. Laise was previously a senior writer at SmartMoney magazine. She started her journalism career at Bloomberg Personal Finance magazine and holds a BA in English from Columbia University.