Practical analysis for investment professionals
30 April 2015

With Bonds, Don’t Panic about Rising Rates

The possibility of rising rates has caused waves of concern among investors. Particularly, investors fear the duration effects of such potential rate increases. But according to Financial Analysts Journal authors Martin L. Leibowitz, Anthony Bova, CFA, and Stanley Kogelman, there is no need to panic.

In their March/April 2015 article “Bond Ladders and Rolling Yield Convergence,” the authors explore what would happen if rates went through a series of rises over the longer term. Would investors suffer losses or possibly even be better off? Pat Light, assistant editor at CFA Institute, got the chance to talk with Kogelman about this research.



Building on a 1990 article published in the FAJ, “Duration Targeting and the Management of Multiperiod Returns,” the authors explore how multiyear returns converge to the starting rolling yield if the yield curve experiences a series of parallel shifts. For duration-targeted portfolios, the theoretical convergence horizon is one year less than twice the duration target.

To put it simply, “if you are concerned about rising rates and you aren’t convinced that you can perfectly time duration adjustments to your portfolio,” Kogelman said, “you should be more comfortable sitting back and assuming that over the course of time, you’re going to get the initial yield or the initial rolling yield of the portfolio that you anticipated.”

To learn more about the results of this research and its important practical implications, listen to the interview above or download the MP3. CFA Institute members can read the full article on the CFA Institute Publications website.

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

About the Author(s)
Abby Farson Pratt

Abby Farson Pratt was an assistant editor at CFA Institute. Previously, she worked at the Denver Post and at the University of North Carolina Press. Pratt earned the Claritas™ Investment Certificate and holds a BA in journalism and English from the University of North Carolina at Chapel Hill.

3 thoughts on “With Bonds, Don’t Panic about Rising Rates”

  1. Jerry Brown, CFA says:

    What is the magic behind the 2*DT – 1 convergence period to the average rolling yield, with DT = duration target? Impressive work – I will tell our clients not to panic! Thanks, Jerry

  2. Guest says:

    Absolutely terrible audio quality. It’s quite a chore to understand what he’s saying. I’m giving up.

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