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CIP Quips

Jubilate for Rising Rates

Did you know...

Generally speaking, when interest rates rise, bond prices decrease. For total return investors this may not be ideal, but as income investors we think it’s time to get excited about rising interest rates.

Coupon income is a significant contributor to bond returns. During the periods of (I) November 1986 to March 1989, (II) January 1994 to April 1995, (III) February 1999 to July 2000, and (IV) June 2004 to August 2006, every fixed income sector experienced positive returns, coupon returns accounted for over 90% of bonds' total returns, and the coupon income generated offset the negative price returns. 

Analyzing 1994, when the Fed was arguably its most aggressive, the Barclay’s US Aggregate Bond Index declined just shy of 3%. Over the course of that year, the Barclay’s US Aggregate Bond Index saw yields above 7%. From the end of 1993 to the end of 1995, the Barclay’s US Aggregate Index returned 15%. Not a bad run.

While we cannot predict the future of the current rising rate cycle, and recognizing that each interest rate cycle has its own unique characteristics and circumstances, in general we know that the higher the coupon and the longer the holding period, the higher the income cushion is in helping to offset the impact of price declines. 


Source: ICMA-RC via Barclays Risk Analytics and Index Solutions ltd (BRAIS); BofA Merrill Lynch Global Index System; Hueler Companies Inc.


What are we thinking…

At Roosevelt, we manage CIP as a solution for cash flow, not for total return. As income investors, we appreciate that total return includes interest, capital gains, dividends, and distributions that are realized over a certain period. Instead of reaching for that high total return in today’s market place, we strive for reducing risk and providing investors with a sustainable and substantial income stream.

CIP is structured to benefit from a rising rate environment while also providing income investors with high income in low rate environments as well. Our strategy is suitable for most savers, not just retirees or those soon approaching retirement, but also for younger investors who can take advantage of the compounding interest gained, which when reinvested could get more dramatic as time goes by.



This information is intended solely to report on investment strategies and opportunities identified by Roosevelt. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Please contact us at 646-452-6700 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions, or if you would like to request a copy of our Code of Ethics. Our current disclosure statement is set forth on our Form ADV Part II, available for your review upon request, and on our website, www.rooseveltinvestments.com.

Past performance is not a guarantee of future results. Indices are unmanaged and cannot accommodate direct investment. Themes assigned as per Roosevelt Investments’ evaluation. Risk tools may include cash or other securities that we believe possess a low or inverse correlation to the overall market.


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The Roosevelt Investment Group, Inc. is an independent investment management firm that is not affiliated with any parent organization. The Roosevelt Investment Group, Inc. manages equity, fixed income, and balanced assets for primarily U.S. clients. The Roosevelt Investment Group, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission and notice filed in all 50 states.

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