Back in March 2013 the WSJ published and article, where they stated that large money managers like Blackrock,TCW Group Inc.and Pacific Investing Management Co. at that time they were already
preparing for an interest hike, because they thought that the Fed couldn't keep interest rates so low
for a longer period of time. They were worried that when the interest rate hike came, the ascent would be quick and steep. So rather than taking a guess when it will come,they were taking pre-emptive moves making investments that would pay off in an scenario of higher interest rates.
preparing for an interest hike, because they thought that the Fed couldn't keep interest rates so low
for a longer period of time. They were worried that when the interest rate hike came, the ascent would be quick and steep. So rather than taking a guess when it will come,they were taking pre-emptive moves making investments that would pay off in an scenario of higher interest rates.
The moves included buying debt with floating interest rates that rise as overall rates climb, as well as interest-rate swaps and inflation-protected bonds that will also increase in value.
Other investors were hedging against potential bond losses by making bearish bets on U.S. Treasury bonds through derivatives that gain when rates rise. As rates rise, prices of bonds fall.
Because rates are so low now, many investors are worried that even a small rise could be particularly painful for anyone holding Treasurys.
