“In essence, if rates continue to rise, the coupon income of credit risky bonds can be wiped out quite easily. Since it is more a question of when, rather than if, that tapering will reemerge, one better hedge out rate risk to benefit from credit spreads.”

GLOBALCAPITAL INTERNATIONAL LIMITED, a company

incorporated in England and Wales (company number 15236213),

having its registered office at 4 Bouverie Street, London, UK, EC4Y 8AX

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“In essence, if rates continue to rise, the coupon income of credit risky bonds can be wiped out quite easily. Since it is more a question of when, rather than if, that tapering will reemerge, one better hedge out rate risk to benefit from credit spreads.”

--Michael Hünseler, head of credit portfolio management at Assenagon Asset Management in Munich, on the reasons for Assenagon using interest rate swaps to isolate credit risk from rate risk.

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