Discover and read the best of Twitter Threads about #FloatingRateFunds
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It was evident. Interest rates would rise as #inflation started spiralling.
To ride through the rate hike cycle⬆️, #FloaterFunds were touted as an ideal #investment option.
But, so far, they haven’t done well.
A 🧵on why #FloatingRateFunds haven’t delivered yet.
To ride through the rate hike cycle⬆️, #FloaterFunds were touted as an ideal #investment option.
But, so far, they haven’t done well.
A 🧵on why #FloatingRateFunds haven’t delivered yet.
First, some basics.
When #InterestRates rise📈, bond #prices fall📉. Why? Investors would rather buy new papers at a higher rate than old ones with lower yields.
#FloaterFunds are not impacted by interest rate movement. There’s a simple explanation.👇
When #InterestRates rise📈, bond #prices fall📉. Why? Investors would rather buy new papers at a higher rate than old ones with lower yields.
#FloaterFunds are not impacted by interest rate movement. There’s a simple explanation.👇
As the #InterestRates rise, the yields on floating-rate bonds also increase.⬆️
So, #investors don’t need to sell them to buy new papers offering higher interest rates.
But the converse is true, too. So, when interest rates fall📉, #FloaterFunds become unattractive.
So, #investors don’t need to sell them to buy new papers offering higher interest rates.
But the converse is true, too. So, when interest rates fall📉, #FloaterFunds become unattractive.
