Bond ETFs are starting to crack under the strain of higher interest rates.The bellwether 10-year Treasury note yield rose as high as 2.90% Monday, the highest level since July 2011. Rates have soared since May 2, when the 10-year T-note yield hit 1.62%, thanks in part to the Federal Reserve’s program of buying long-term bonds to keep rates artificially low. AFTER BERNANKE: What’s in store for stocks? VIDEO: Cramer’s top REIT pickBut Wall Street has begun to wonder when the Federal Reserve would slow down the pace of its bond-buying program, and that has pushed interest rates up. For bond investors, that’s bad news: When rates rise, bond prices fall. And the biggest example of that phenomenon is the decline in some of the nation’s largest exchange-traded bond funds:• The $18 billion iShares iBoxx $ Investment Grade Corporate Bond fund (LQD) has fallen 7.94% since May 2, according to S&P Capital IQ. That’s including reinvested interest from the fund’s bond holdings.• The 3.7 billion iShares Barclays 20+ Year Treasury Bond (TLT) has plunged 15.9% the same period. Longer-term bonds typically get hit harder when rates rise than shorter-term bonds. For example, the iShares Barclays 3-7 Year Treasury Bond fund (IEI)… Read full this story
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