December 29, 2018, 6:02 AM
Dear Mr. Berko: I have eight long-term maturity bonds from eight different public companies, each with coupons between 5.5 percent and 5.65 percent. They are all rated BBB, which is still bank-quality, and I paid about $10,000 for each bond. My stockbroker wants me to sell these bonds because he believes interest rates will go up to 10 percent in the next few years. He told me that these bonds, which I bought about a year ago, could decline in value by 50 percent. I am concerned that I would lose a lot of money if rates were to rise. But I don’t understand how bonds could fall in price if the issuing bond companies maintain their credit ratings and earnings. Could you please help me understand this? Is my broker right about interest rates rising? I’ve been reading your column for 30 years.