Treasury yields spiked. Bond prices fell. Retirees who thought fixed income meant fixed prices are now refreshing their Schwab accounts like they're checking lottery numbers. Except the lottery is in reverse and they already lost.
Dividend-paying sectors slipped too. The same stocks retirees bought because they "never go down" went down. Utilities. REITs. The boring stuff financial advisors recommended so Bob from Tampa could sleep at night. Bob is not sleeping.
The headline promises steps to shore up income. Steps. As if there's a manual for this. As if Gary who retired in March with a portfolio of AT&T and twenty-year Treasuries just needs to read page seven of the pamphlet his advisor gave him in 2019.
Here's what the steps actually are: sell the bonds that dropped for a loss, buy different bonds that might also drop, or chase yield into something riskier. Maybe Bitcoin. Maybe leveraged ETFs. Maybe a REIT that owns parking garages in Cleveland. Shore up income by taking on more risk after you already retired specifically to stop taking risk.
The technical setup could not be clearer. When yields rise, bond prices fall. This has been true since bonds were invented. Since the Venetians were trading debt in the 1300s. But every cycle produces a fresh batch of retirees who bought thirty-year bonds at 1.5% and now want to know why their principal vanished.
They were reaching for yield when yields were zero. Now yields exist again and they're still reaching. They'll reach until they're holding nothing but leveraged municipal bond funds and a 1-800 number for their daughter who works in compliance.
The article exists because someone needs to tell them what to do next. The answer is nothing. Clip the coupon. Wait thirty years. Die before maturity.
Photo by Brett Jordan on Unsplash
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