A Better Bit of Bonds Banter

My pension plan bond fund continues to sink slowly below the horizon. As it does, I went out in search of solace and support. Here are some articles that illuminate the many facets of bonds.

Who knew that bond rates could determine whether or not you could afford to buy a first home? This connection had escaped my notice, till I read The Star’s article “Higher bond yields trigger hike in mortgage rates.”

Rob Carrick at the Globe and Mail offers advice on “How to navigate a stormy bond market.”  Apparently, we could see a 9% drop this year in my Bond fund, but I should also sit tight and wait it out. Easy to say, harder to do!

If I’m so nervous, why do I have any money in bonds? I explain my choices (or lack thereof) in “Why Defined Contribution Pension Plans are a Pain: Fixed Income Choices or Lack Thereof.”

If you do drop bonds, where do you put the money? The Passive Income Earner provides food for thought in the “Difference Between Bonds and Preferred Shares.” Specifically the comparison is between corporate bonds and corporate issued preferred shares, rather than, say, government bonds.

Michael James on Money explored why you really have to scrutinize proposed financial plans closely in The Futility of Leveraging Bonds. At first, the idea seems reasonable. Take out a loan; Invest a portion in the stock market and a portion in fixed income. Pay the interest on the loan and keep the balance. But what if the fixed income investments are paying less than the interest costs?

The Wall Street Journal warns Bond Slump Saddles Big Banks: Large Banks Can’t Avoid Trouble When Interest Rates Rise.  It’s hardly encouraging news. In a fascinating accounting twist, apparently “The second-quarter losses didn’t affect banks’ earnings because of a quirk in accounting rules that allows institutions to keep any paper losses on long-term bonds out of the profit-and-loss equation.” I wonder how many quarterly bonuses were paid without the average share owner knowing how large those losses were?

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Have you found a recent article on bonds that makes the murky depths crystal clear? Please share an insight or a link with a comment.