Invesco Canada blog

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Matt Brill | January 22, 2018

Let bonds be bonds – don’t fear duration

Often investors become concerned about duration in a bond portfolio, believing that if interest rates rise, duration will increase the potential for losses.

Matt Brill, Senior Portfolio Manager of Invesco Global Bond Fund, discusses why a fixed-income portfolio should include some duration if it is to provide an adequate buffer when equities fall.

 

Transcript

Key takeaways

Investors should consider that there are mitigating factors – not all duration is created equal:

  • Corporate securities may benefit from tightening credit spreads when interest rates rise
  • Duration can provide a negative correlation to equities in the event of an equity correction or geopolitical event
  • If duration is eliminated from a bond portfolio, the remaining exposure is typically credit spread – which is correlated to equities

Visit InvescoGlobalBond.ca for more perspective on Invesco Global Bond Fund and how the Invesco Fixed Income team is addressing today’s fixed income challenges.

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Duration is a measure of the sensitivity of the price of a fixed-income investment to a change in interest rates. A higher/longer duration generally means the price of a fixed income product will be more sensitive to changes in interest rates.

Invesco Fixed Income (IFI) is a unit comprising Invesco Senior Secured Management, Inc. of New York, U.S.; Invesco Advisers, Inc. of Atlanta, U.S.; Invesco Asset Management Ltd. of London, U.K.; and Invesco Canada Ltd. of Toronto, Canada.

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