The Complexity of Interest Rates: Beyond the Fed’s Decisions
By Gene Balas, CFA®
Investment Strategist
Investors may see the current environment as a time to “lock in” a fixed income investment at current interest rates based on the belief that the Federal Reserve will soon lower interest rates. But it’s more complicated than that. When discussing interest rates, we must first define which interest rates we are referring to.
The Federal Reserve controls the very short-term rates that dictate the overnight interest rates for banks’ lending to each other. It is these short-term rates that are reflected in what investors receive in bank savings accounts and other short-term instruments, including some money market funds and certain other products. These rates are influenced by Fed decisions.
However, longer-term interest rates for securities with maturities from anywhere from a few months duration out to 30 years or so are determined by investors’ decisions to buy or sell bonds on the open market. These rates are not controlled by the Fed, but rather by supply and demand in the financial markets. more
Read More
Third Party Site
The information being provided is strictly as a courtesy. When you link to any of the websites provided here, you are leaving this website. We make no representation as to the completeness or accuracy of information provided at these websites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, websites, information and programs made available through this website. When you access one of these websites, you are leaving our web site and assume total responsibility and risk for your use of the websites you are linking to.
Dated Material
Dated material presented here is available for historical and archival purposes only and does not represent the current market environment. Dated material should not be used to make investment decisions or be construed directly or indirectly, as an offer to buy or sell any securities mentioned. Past performance cannot guarantee future results.
Market Commentary|August 2022