Long-Term Bond Holders Are 'Going to Get Massacred'

The bond markets have been garnering a lot of attention in recent months. How should investors get involved and what should they watch for? Marilyn Cohen, president of Envision Capital, shared her insights.

“The fixed income market has been unbelievably embraced by baby boomers,” Cohen told CNBC.

“We’ve seen more flows into bond funds than ever before.”

Cohen said more money has been going into bond funds, from municipal funds to investment grade corporates, in 2009 than in the last 10 years.

“What people need to do is book some of those profits—take some of the profits out of your long-term bond funds and buy individual bonds in the front of the yield curve,” she said.

“There will be unbelievable opportunities because rates are going up—it’s only a matter of when—and people in long-term bonds are going to get massacred.”

Cohen said she is not concerned over corporate bonds as credit quality has improved and balance sheets are in good shape. But for municipal bonds, “it will take a long time for the trickle down effect from the better economy to reach the state, cities and counties.”

Avoid bonds from riskier states like California and Florida and invest in successful areas like Texas, Georgia or Tennessee, she advised.

  • Watch Cohen's Previous Appearance on CNBC (Jul. 21, 2009)

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No immediate information was available for Cohen or her firm.