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Tuesday, June 17, 2014

Next Rise in Interest Rates Will Come in 2015

With the Federal Reserve reducing the extraordinary bond purchases it has made for the past five months, you’d think that bond prices would fall and interest rates would rise. But that hasn’t been the case, even as the Fed has trimmed its purchases by $10 billion every six weeks since January. Instead, 10-year Treasury bond rates have dropped from 3.0% to 2.6%.

The slow economy in the first part of the year was a factor in the decline in rates. But there are a number of reasons for bonds' surprising strength. A close look at them provides some guidance on where interest rates will head, even as economic growth picks up speed.

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