Investors fear higher interest rates. So much that their piles of cash in money markets and banks are overflowing. All the TV and print media gurus have so far been wrong about interest rates. Most called for much higher rates since the year began. We’re not there yet.
Rather than be fearful, invest in some fix-to-float bonds. Should the prophets somehow get it right and rates rise significantly, you will participate in that interest rate trajectory.
We recently invested in a fix-to-float bond issued by Western Alliance Bank. They are a full-service bank covering Nevada, Arizona, and California. These Western Alliance subordinated bonds (CUSIP: 95763PEF4) are rated Baa2 by Moody’s
Here’s the catch: If Western Alliance Bank calls the bonds on June 1, 2025, investors won’t benefit from the floater component.
Another catch is the $100,000 minimum denomination to purchase these particular fix-to-float bonds. But hey, you are Forbes readers! Just peel off a few of those QQQs or Dow Diamonds
If you think this requires extra effort, you are correct. This may force you to do business the old-fashioned way—call a broker. There are many brokerage firms that traffic in fix-to-float bonds. Not all have minimum denominations.
Insulate your portfolio if the gurus should somehow get their calls for much higher interest rates correct. Fix-to-float bonds may be a valuable addition to your investment strategy.