Originally Posted by nun
I don't think you'll see rates go up by 1% overnight, much more likely that they'll creep up in 0.25% steps and you can rebalance. Still I'll stick to my AA as I expect to get most of the return from my bonds in interest and not NAV appreciation.
You are generally right but 1% hikes overnight aren't unknown, Volcker did it. More importantly the Fed often act pretty swiftly. For instance between June of 2004 and June of 2006 the Fed raised the Fed Rate from 1% to 5.25% in .25% increase roughly every two months. It was cut 5% 5.25%-.25% from Aug 2007 to Dec 2008.
But back in 2004 most bond funds were paying 6% a lot different than the 2.5% of today.