Bogleheads On Investing Podcast · bogleheads

Episode 90, Vanguard's Perryne Desai discusses fixed income concepts and investment strategy, Rick Ferri host

January 22, 2026·53 min·1 clip

When interest rates rise, existing bonds with lower coupons fall in price because investors can get better yields elsewhere.

Fixed income gets a proper reset here. The episode starts with the recent rate cycle: the 10-year Treasury dropped to about one half percent during COVID, climbed hard to five percent, then settled around four and a quarter. Rick Ferri lays out the path pretty plainly. Basics first, then common uses, then newer Vanguard products, then a look ahead. The teaching is calm, but it does not stay fluffy for long. Mortgage-backed bonds do a lot of the heavy lifting. They show how a quoted yield or duration can look tidy while the actual bond has moving parts underneath. Prepayment risk gets the attention it deserves. Perrine Desai explains that managers look at mortgage locality, tranches, rates, durations, housing-market movement, and the mechanics of the mortgage industry when they judge that risk. Ferri brings in some old fixed income history too. He remembers learning prepayment tables early in his career, including a trip to Andrew Davidson's office in Soho to pick up material the old-fashioned way. Municipal bonds add another wrinkle. Ferri notes that almost every municipal offering with maturities beyond 10 years has a call feature, which makes yield to maturity less simple than it looks. That matters for fundholders, because a portfolio can post yield to maturity while callable bonds may act differently if issuers redeem them early. The episode stays useful. Long-duration municipal funds and high yield municipal funds get discussed through duration, call risk, and investor cash flow needs. Near the end, Ferri says Target Maturity munis could help high income investors who want predictable yearly money for retirement goals or other liabilities. The point is measured: fixed income can be useful, but the labels only help once the assumptions underneath them are clear.

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