Shurwest’s bond alternative whitepaper outlines key fixed income risks retirement investors could face.


In recent weeks, the yield on the benchmark 10-year Treasury note has been declining. Good news for bond investors.

As yields fall, prices rise and the trend of recent weeks may have given those following the fixed income market a brief respite from the volatility the Treasury market has experienced for much of this year. The 10-year note’s yield rose above 3.00% in May for the first time in four years but has retraced ground since then.

The day-to-day movements in market interest rates like that of the 10-year note may not be the top worry retirement investors focus on. However, volatility in their portfolios is likely a concern and not a recipe for success – particularly when your clients are seeking to preserve and protect their capital, get a decent return, and diversify from equity risk.

Given the current market environment, achieving those objectives may make for a bumpy ride. These days it would appear as if market sentiment seems to be teetering between major–and basically opposing—scenarios, as Christine Benz, Morningstar’s director of personal finance, noted in a July 9 post.

“If economic growth remains robust, that could spark inflation and/or prompt the Federal Reserve to take an even more aggressive tack on interest rates than it has already outlined. Such a scenario would continue to weigh on bond prices and could have a negative effect on stocks, too,” she wrote. On the other hand, Benz noted, it seems lately, that market participants are contemplating the opposite possibility – slowing economic growth and perhaps even a recession. That is evident in a flatter yield curve, in which long-term bonds yield just a bit more than shorter-term ones.

“The fact that investors aren’t demanding any extra recompense for owning long-term bonds indicates they believe inflation–and in turn interest rates–will remain low,” Benz said.1

Neither scenario is optimal for retirement investors seeking to protect and grow their portfolios.

And that’s where fixed indexed annuities (FIAs) can possibly play a role in a retirement investor’s portfolio. A growing number of investment advisors believe FIAs closely approximate bonds and other fixed-rate products, such as savings accounts or CDs.* Historically-low interest rates being paid on those accounts have contributed to FIAs becoming an alternative, especially with their potential for greater growth and compound interest based on market performance, while avoiding actual exposure to market risk. And given the volatility in global stock and bond markets this year and the prospect that interest rates could rise well above the near-historic lows of recent years, Shurwest has a whitepaper on how FIAs can potentially offset fixed income risks in a rising rate environment.

Shurwest’s “Fixed Indexed Annuities Offer Protection Amid Potential Bond Market Volatility” whitepaper is also a great icebreaker for engaging with clients about some of the risks when it comes to bond investing – including interest rate risk, credit risk and duration risk.

The whitepaper also includes a section on how some bond funds might actually exhibit more volatility than equities because of the lower credit quality of some of the underlying securities within the bond funds.

Want to know more?

Contact your Shurwest director of advisor relations now for access to the whitepaper! 800.440.1088


1 “Is Your Retirement Portfolio All-Weather?” Christine Benz., July 9, 2018. (accessed July 18, 2018).


*FIAs do not offer guarantees like those from the Federal Deposit Insurance Corp., of which the standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category, such as CDs, savings, checking and other accounts
**Guarantees and protections of fixed indexed annuities are subject to the claims-paying ability of the issuing insurance company. Fixed indexed annuities are contracts purchased from a life insurance company. They are designed for long-term retirement goals, and also intended for someone with sufficient cash and liquid assets for living expenses and unexpected financial emergencies, including, for example, medical expenses. Depending on the product, fixed indexed annuities may include surrender charges, rider charges and other fees.
***A fixed indexed annuity is not a registered security or stock market investment. As such, it does not directly participate in any stock, equity or bond investments, or index. Gains on indexed accounts are based on participation rates and other conditions offered by the issuing insurance company. Withdrawals are subject to income tax, and withdrawals before age 59½ may be subject to a 10% early withdrawal federal tax penalty.
This document is for informational purposes only and is not intended to provide any recommendations or tax or legal advice. We encourage you to discuss your tax and legal needs with a qualified tax and/or legal professional.