DonÛªt Leave Your Bonds at Wall StreetÛªs Beck and Call
On Wall Street, itÛªs the Year of the CallÛÓand for income investors, the Year of the Bawl. Falling interest rates are pulling the rug out from under folks who thought they had locked up high income for life.</br></br>Billions of dollars worth of high-income bonds are likely to be ÛÏcalled in,Û or retired, this yearÛÓmuch earlier than most investors had expected. TheyÛªll be replaced with securities paying lower rates.</br></br>What investments are at risk? Anything paying 2 percentage points or more above current interest rates.</br></br>YouÛªve been hitÛÓor soon will beÛÓ whether you own individual bonds or shares in income mutual funds and unit trusts. High-income unit trusts could be hammered the hardest because, unlike mutual funds, they cannot easily sell off bonds that are vulnerable to an early call. So the trusts are likely to lose some of the profits that theyÛÓand youÛÓexpected from the investment.</br></br>What do you lose when a bond is called? First, you lose the double-digit income that has been adding a little luxury to your life.