If held until the bond is redeemed (either by call or maturity), the annual yield earned for the life of a bond is known upfront at the time of purchase. Knowing the return on an investment upfront makes long-term financial planning a much easier task.
While this is a market estimate and in no way guaranteed, let’s just pretend for a minute that there is a 100% chance of this coming true and the FOMC is going to raise the Fed Funds rate by an additional 50 basis points.
Drew O’Neil discusses fixed income market conditions and offers insight for bond investors.
It is difficult to convince yourself that if things are going a certain way they will not continue down the same path indefinitely.