A comprehensive risk management strategy includes the identification, measurement, monitoring and controlling of the interest rate risk. The risk that affects and influences so much in the markets, that in this particular piece we will focus on the side of the prices of fixed-rate bonds falling due to rising interest rates.
Interest rates climb when the economy is growing and fall during the economic slowdown. Similarly, rising inflation leads to rising interest rates, and diminishing inflation leads to lower interest rates. Inflation is one of the most influential forces on interest rates.
It is particularly important for investors to consider interest rate risk especially when they buy bonds in a low-interest rate environment which is common to all the bonds, including US Treasury bonds. But its effects go well beyond just lowering the prices of bonds, it’s a constant variable that even influences a bank’s financial condition, according to the FDIC. This just adds a crucial piece of information that fiduciaries in all types of industries must be aware of and equipped with the proper technology that gives them access to this up-to-date data.
But going back to the main focus of this post, we look at the interest rate risk on the side of fixed income investors, who consider purchasing long-term bonds and know that they are actually taking on huge interest rate risk. And as we do not have any control over interest rates, this is quite a challenge especially when the data that could show us how the interest rates are doing against the specific securities we are considering to purchase, is unavailable.
As I have mentioned before in other blog posts, this is when PFITR intervenes. With their Bond Price Validation (BPV) tool, and the personalized guidance, the team offers to better understand each portfolio policy, budget and required returns, the BPV tool will give you access to the analytics that will guide you through understanding interest rate risk in today’s current markets. And talking about banks and the FDIC, this should be the standardize solution investors in banks work with to comply with the regulations of how to best manage a fixed income portfolio, looking after the interest rate, other risks and report it back with customary transparency.
Once you have access to the numbers, you can measure, compare, and identify the best time to purchase a specific security. The BPV tool shows these numbers in graphs and other analytics that measure the Yield to Maturity and risks. Reading this information will allow you to take the next step on improving the management of your investments, by now following a specific strategy like for example taking the Barbell approach, the strategy that deals with Interest rate risk; Barbell strategies balance risk by pairing interest-rate-sensitive government bonds with high-yielding credit assets. In simple terms, this strategy involves using only short-term and long-term bonds.
And let’s be honest, when a fiduciary has all the financial responsibilities of his/her organization or corporation, they either need an expert to guide them on making all these decisions or they need to receive training and implement the technology that will equip them with the necessary data to be better informed in making these million dollar decisions.
With more than 20 years of experience in the public fund’s management, author of “Public Fund Investing for Dummies” and founder of PFITR, Jim Koetting knows the in’s and out of the bond market.
After gaining enough knowledge, and training many fiduciaries, Jim decided to develop an investment tool “Bond Price Validation tool” or “BPV Tool” that helps every fiduciary to have transparent bond market information and right coaching & guidance to deal with any kind of risk, and to make better investment decisions.
The online solution “BPV tool” is pre-equipped with transparent unbiased market information along with charts and graphs, such as the Treasury spreads of 26 weeks and 30 days. Not only this, the BPV tool will provide you with real market prices, coupons, ratings, yield to maturity, historical duration, and call provisions which investors need to look at before purchasing bonds. Interestingly, all this information is readily available at one place and in one source.
The best part about PFITR is that it provides you with an online transparent bond market information through its BPV tool and, also train and guide you on how to best invest according to your portfolio policy.
The aim is to use knowledge and technology to make sure that the users improve their fixed income portfolio returns. While keeping up to date with what is happening in the market and best practices for them to execute. The solution that we are recommending here is built with the necessary algorithms and current market data, to display the analytics that show the risks investors need to look after.
With the help of proper coaching along with user-friendly tools, fiduciaries and treasury professionals can obviously make better-informed investment decisions, mitigating risk and keeping their portfolios safer.
Why don’t you try it out and experience PFITR’s great customer service at https://www.pfitr.com/bpv-tool/
Want to know more about PFITR? Please write an email to us at firstname.lastname@example.org or call us at 1-800-921-1992.