U.S. News: Why the Bond Market Pullback Shouldn't Worry Investors

By SIMON CONSTABLE

The bond market is in a good news, bad news situation. The bad news is that bond prices are down. That's also the good news.

Here's what long-term investors need to know: stay calm. 

Here's what happened in the fixed-income market: it sank. For instance, the iShares iBoxx Investment Grade Corporate Bond exchange-traded fund (ticker: LQD), which holds a basket of high-quality fixed-income securities, retreated 4.7 percent in the six months through Jan. 18, while the Standard & Poor's 500 index gained 5 percent.

"Expectations of higher U.S. economic growth drove expectations of higher inflation, sending interest rates higher," says Vinny Catalano, global macro strategist at Blue Marble Research in New York. Interest rates and bond prices move inversely, so higher interest rates mean lower bond prices. Read more here.

Photo by Sophie Backes on Unsplash