THE BENEFITS OF RISING INTEREST-RATES

The author argues that rising interest rates help, rather than hurt, a lmost all fixed-income investors. The benefit of rising interest incom e substantially exceeds the injury stemming from capital losses for ho lders of short- and intermediate-duration bonds. (Holders of long-term bonds are helped a little.) Investors who are still net savers are he lped the most, but those who are merely reinvesting their interest inc ome and even those who are spending it are helped to a surprising degr ee. Only those who are plowing through their capital at very rapid rat es lose when interest rates rise.