\n Rising bond yields have been causing plenty of consternation among fiscal hawks and investors, with good reason.\n <\/p>\n
\n Higher bond yields make it more expensive for governments, companies and in some cases consumers to borrow. And they\u2019ve been rising amid growing concerns over inflation and other economic<\/a> and geopolitical issues<\/a>.\n <\/p>\n \n So, yeah. It\u2019s not great.\n <\/p>\n \n But also \u2026 not necessarily terrible for your money in all instances.\n <\/p>\n \n For example, if you have savings to invest? Higher bond yields are \u201cunequivocally good news,\u201d said Collin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research.\n <\/p>\n \n Here\u2019s a look at how today\u2019s bond yields may affect your money in six different situations.\n <\/p>\n \n When bond yields rise, their prices fall. And price-wise, longer-term bonds (like the 30-year Treasury) have taken the biggest hits.\n <\/p>\n \n So if you have to sell a bond before it reaches maturity you\u2019ll probably get less than you paid for it plus you\u2019ll be giving up the future income that bond promises to pay out.\n <\/p>\n \n But if you\u2019re planning to hold your bond to maturity, any decline in price isn\u2019t a concern. Nothing changes for you because you will continue to get paid the interest you were promised at the start.\n <\/p>\n \n And if you\u2019re thinking of selling just to get a better yield elsewhere, you\u2019ll have to do the math to see if it pays off.\n <\/p>\n \n Say you bought a 2-year Treasury bill at 3.4% at the end of February, Martin said. You have about 18 months left to maturity. But today you could get another 18-month bill for 4.3%. However, you\u2019d lose some principal if you were to sell your current 2-year back into the market. And the extra yield you\u2019d gain by buying a new 18-month bill at 4.3% likely wouldn\u2019t compensate you enough to make the switch worth it.\n <\/p>\n \n \u201cNet\/net, you\u2019re looking at a pretty similar return if you were to sell at a lower price and invest in the new, higher-yielding security,\u201d Martin said.\n <\/p>\n \n But if you can afford to reinvest your money for another two years, you might do better buying a new 2-year bill at 4.4%. \u201cIf you consider slightly longer maturities (than what you own now), that\u2019s where you can see the value. The longer you invest, the more the extra income you earn can offset that price decline,\u201d he explained.\n <\/p>\n \n See: \u201cUnequivocal good news\u201d above.\n <\/p>\n \n Prices have fallen and you\u2019re getting to lock in a high yield for your money for the duration of the bond.\n <\/p>\n \n \u201cIt\u2019s almost as if the bonds have gone on sale,\u201d said Dominic Pappalardo, chief multi-asset strategist at Morningstar Wealth.\n <\/p>\n \n Shorter-term Treasuries are a good place to earn a very solid, low-risk return on money you\u2019ll need for a near- or intermediate-term expenses (e.g., buying a home, college costs, etc.)\n <\/p>\n \n Or, if you have a financial plan and know what your end goal is, you may be able to \u201cde-risk\u201d your portfolio a bit (by putting more in bonds, less in stocks) if doing so would still let you meet your goal with less risk, Martin suggested.\n <\/p>\n \n When you set up a bond ladder<\/a> for a period of time \u2013 say, five years \u2013 you purchase bonds of different durations within that time frame. Every time a bond on your ladder matures, you take the proceeds and invest it in a new one. So you\u2019ll get to take advantage of today\u2019s higher yields and lower prices when your next bond matures.\n <\/p>\n \n The benefit of setting up a bond ladder is that \u201cyou\u2019re taking the guesswork out of investing,\u201d Martin said. \u201cIt eliminates the need to time the market.\u201d\n <\/p>\n \n How today\u2019s high yields affect you depends on the types of bonds your fund invests in.\n <\/p>\n \n \u201cA fund that has longer-dated bonds will experience a bigger price decline,\u201d Pappalardo said. \u201cThe length of time to maturity is what dictates how much the price moves.\u201d\n <\/p>\n \n Prices on shorter-term bonds are less volatile in the face of changing yields, he explained.\n <\/p>\n \n But if you\u2019re invested for the long term, fund managers will have to rebalance the portfolio as bonds come due so may be able to invest in lower-priced, higher-yield paper.\n <\/p>\n \n Even if you don\u2019t have much bond exposure, there could come a point where stocks take a hit.\n <\/p>\n \n \u201cUsually, higher yields are not great for stocks, but lately it hasn\u2019t mattered much. But historically higher rates tend to have a negative impact on stocks. Be cognizant of that,\u201d Martin said.\n <\/p>\n \n Even if they do, if you\u2019re investing in certain stocks or stock funds for the long run, and you\u2019re dollar-cost-averaging (i.e., you invest a fixed amount every month), you can benefit when stocks take a hit because you\u2019re buying shares at a cheaper price.\n <\/p>\n \n Okay, so, the \u2018mixed bag\u2019 story ends here.\n <\/p>\n \n Neither Martin nor Pappalardo think bond yields will come down from where they are in the near term.\n <\/p>\n \n That\u2019s not great news if you\u2019re in the market for a mortgage or auto loan, which are affected by bond yield movements, especially on the 10-year Treasury<\/a>, among other things.\n <\/p>\n