Need a bit of help understanding the 6% drop (12.83 to 12.07/sh). The fund duration is 3.7 years, hence, my expectations were that for each 1% rise in interest rate we would see 3.7% decline in NAV. We haven't seen the 1% rise in rates yet, but have already incurred 6% drop in NAV. What other dynamics are out there setting this fund NAV? Thanks in advance.
Since early May 10 years treasury has risen 1% and mortgage rate also was up more than 1%. PONDX has 52% mortgage in its portfolio according to Pimco's website, this is the reason for that 6% drop of its NAV. Interest rates are going up when the Fed is only talking about slowing down bond buying, Watch out when Fed starts implement it.
Richard, thanks for the response. However, the point of my questoion is that 1% rise in interest rate should only lead to 3.7% in NAV, given its 3.7 years average bond duration. So, I am still at a loss why the now greater than 6% drop. Basically, my question is: What is causing the drop in NAV beyond the expected 3.7%. Thanks