YIELDING TO HIGHER YIELDS

June 21, 2007
By seadmin

The precipitous spike in bond yields of late has taken on a life of its own. Although rates have come back off their recent highs, the move toward higher long-term interest rates definitely is in full effect.

In light of this now-established trend in bond yields, my High Monthly Income advisory service clients are positioning their money to take full advantage of this circumstance.

Just today we have allocated to an inverse bond fund that moves higher when the price of Treasury bonds falls. As you can see by the chart below, yields have been on a tear of late, and this surge in yields translates into a real profit opportunity.

I believe bonds are now entering what can now be described as a mini-bear. This mini-bond bear, i.e., the widespread rise in interest rates, also has taken its toll on other interest-rate sensitive sectors such as real estate and utilities. The two charts below, IYR and XLU, demonstrate the pernicious affect that higher rates are having on these once high-flying sectors.

If you currently are allocated to either real estate stocks or utilities, make sure you set a stop loss to protect yourself against any more selling in the sector.

Better yet, if you want to find out how my High Monthly Income subscribers are putting their money on the right side of the interest rate surge, click here.

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