What Happens When Treasury Rates Rise?
You may be wondering how potential short-term interest rate increases could affect your fixed income investment. To understand the correlation between rising Treasury rates and bond prices, think of a seesaw. When interest rates rise, the value of outstanding bonds falls because the interest they pay is less than what investors could receive on a new bond. This could cause the value of your fixed income portfolio to decrease.
Here’s a closer look at how an immediate 1% rise in Treasury rates could impact a fixed income portfolio comprised of U.S. Treasury (UST) bonds with 3-7 and 7-10 year maturities.1
A Fixed-Indexed Annuity Can Help
Purchasing a fixed-indexed annuity can diversify your portfolio and help avoid the negative impact of rising Treasury rates. Unlike Treasury bonds, fixed-indexed annuities credit interest that is based, in part, on the performance of a market index. Additionally, fixed-indexed annuities offer:
- Tax-deferred growth
- Protection from loss
- Access to your money with penalty-free withdrawals2
- Opportunity to receive lifetime income
Talk with your financial professional to see if a fixed-indexed annuity is right for you.
1 Based on the performance of an exchange traded fund that tracks the investment results of an index composed of U. S. Treasury bonds with the indicated remaining maturities.
2 If you withdraw money from an annuity during the early withdrawal charge period, an early withdrawal charge may apply. Early withdrawal charge rates and periods vary by annuity product. An early withdrawal charge will reduce the account value and may have a significant effect on the benefits available with the annuity. Withdrawals and distributions may be subject to income tax and, for some tax qualifications, may be restricted. If withdrawals or distributions are taken prior to age 59½, a 10% federal penalty tax may apply.
This information is not intended or written to be used as legal or tax advice. It was written solely to provide general information and support the sale of annuity products. You should seek advice on legal or tax questions based on your particular circumstances from an attorney or tax advisor.
When you buy a fixed-indexed annuity, you own an insurance contract. You are not buying shares of any stock or index. All guarantees are backed by the claims paying ability of the issuing insurance company. This flier discusses some aspects of a fixed-indeed annuity. Please read your annuity contract for complete terms and conditions, including information about early withdrawal charges and market value adjustments that may apply during the early withdrawal charge period. Products issued by Great American Life Insurance Company and Annuity Investors Life Insurance Company, members of Great American Insurance Group, Cincinnati, Ohio.
Not FDIC or NCUSIF Insured • No Bank or Credit Union Guarantee • Not Insured by any Federal Government Agency • Not a Deposit • May Lose Value