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Rising rates could spark ‘disorderly’ bond fund exodus

Investors are well aware of what a stock market meltdown looks like, but they may not understand or appreciate the implications of a credit correction. Yet some market watchers are warning a drastic tumble in bond markets is a real possibility. It’s something average investors should keep in mind: they’ve been piling into bond mutual funds that would be hit in such a scenario – and their behaviour could worsen the effects.