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Bond Ladder Considerations

A “ladder” structure of bonds is one in which the bonds in a portfolio are redeemed at different times over a period of years, with each bond becoming due at a different “rung” or year on the redemption ladder. In this way, the portfolio is sure to have a mix of short, mid, and long-term bonds. This is an easy and reliable way to help insulate a portfolio from some interest rate risk. But how do you determine where on the ladder to place a particular bond: By its call year? Its sinking fund year? Its maturity year? How do you determine whether to weight one time segment of the bond ladder more or less heavily than the other segments, and by how much? These are issues that must be addressed in building a bond ladder.

Bond laddering does not assure a profit or protect against loss in a declining market. Yields and market values will fluctuate, and if sold prior to maturity, bonds may be worth more or less than the original investment.

Click for Bond Ladder Considerations PDF

If your portfolio is greater than $500,000, Sharon Alister can provide a free analytic review to help ensure that your portfolio is in line with your investment goals. Call Sharon Alister at (800) 745-7110 or email info@AlisterTalksBonds.com

 

Interest Rates (Indications only)

Please note the rates for Ins’d and Pre-Res are not available from Bloomberg and will be updated as soon as possible.

Treasuries AAA Munis
3mo 1.815 N/A
6mo 2.009 N/A
1yr 2.237 1.74
2yr 2.482 1.87
5yr 2.809 2.19
10yr 2.970 2.53
30yr 3.145 3.14
today's rates chart

AAA Rated Munis

Pre-Res Ins’d Pure*
2 yr 1.91 2.05 1.87
5 yr 2.23 2.49 2.19
10 yr N/A 2.89 2.53
15 yr N/A 3.20 2.82
30 yr N/A 3.50 3.14

*Rated AAA on its own
Source: Bloomberg

Bond Ladder Considerations

A “ladder” structure of bonds is one in which the bonds in a portfolio are redeemed at different times over a period of years, with each bond becoming due at a different “rung” or year on the redemption ladder. In this way, the portfolio is sure to have a mix of short, mid, and long-term bonds. This is an easy and reliable way to help insulate a portfolio from some interest rate risk. But how do you determine where on the ladder to place a particular bond: By its call year? Its sinking fund year? Its maturity year? How do you determine whether to weight one time segment of the bond ladder more or less heavily than the other segments, and by how much? These are issues that must be addressed in building a bond ladder.

Bond laddering does not assure a profit or protect against loss in a declining market. Yields and market values will fluctuate, and if sold prior to maturity, bonds may be worth more or less than the original investment.

Click for Bond Ladder Considerations PDF

If your portfolio is greater than $500,000, Sharon Alister can provide a free analytic review to help ensure that your portfolio is in line with your investment goals. Call Sharon Alister at (800) 745-7110 or email info@AlisterTalksBonds.com

 

Interest Rates (Indications only)

Please note the rates for Ins’d and Pre-Res are not available from Bloomberg and will be updated as soon as possible.

Treasuries AAA Munis
3mo 1.815 N/A
6mo 2.009 N/A
1yr 2.237 1.74
2yr 2.482 1.87
5yr 2.809 2.19
10yr 2.970 2.53
30yr 3.145 3.14
today's rates chart

AAA Rated Munis

Pre-Res Ins’d Pure*
2 yr 1.91 2.05 1.87
5 yr 2.23 2.49 2.19
10 yr N/A 2.89 2.53
15 yr N/A 3.20 2.82
30 yr N/A 3.50 3.14

*Rated AAA on its own
Source: Bloomberg

Investing involves risk, including possible loss of principal. When investing in bonds, it is important to note that as interest rates rise, bond prices will fall. Conversely, as interest rates fall, bond prices will rise.

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