Bond prices (your principal) and interest rates (yield) move in opposite directions. When rates rise, bond prices fall. The inverse is, of course, true as well. When rates fall, the price (your principal) of the bond rises.
The problem today is that short-term Federal Reserve funds rates are pegged at zero percent. In addition, the Fed’s irresponsible bond-buying spree, dubbed QE, has driven even long-term rates insanely low, to 1.5 or 1.6 percent on the 10-year Treasury.
Without rewriting arithmetic, rates have nowhere to go but up — and, eventually, up quite a bit. And the principal invested in bonds will fall substantially.
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