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Editors Picks Where Will Rates be Next Week?
Editors Picks Where Will Rates be Next Week? 
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| Where Will Rates be Next Week? |
| Thursday, 13 December 2007 | ||||||
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Interest rates are a funny thing. If you haven’t noticed, the Fed loves to act like they won’t lower rates. Whether the market believes that or not is a different story altogether. But how can you determine what the market expects future interest rates to be? Just look at the yield of the 10-year bond in the Treasury market. As the bond market anticipates lower Fed rates, they start buying up higher-yielding bonds. This extra demand drives up the price of bonds, and in turn lowers their yields. So if the Fed target rate is set at 4.5 percent and 10-year bonds are yielding four percent, it would be obvious that the market expects the Fed to lower rates by half a percent. If the Fed doesn’t lower rates as expected, then the broad market is more likely to sell off. Finding how 10-year bonds are doing is easy. Simple go to Bloomberg.com and click on the “Market Data” tab up on top. While predicting how interest rates could affect the market in the near term isn’t an exact science, knowing the market’s expectations give you a better idea of where the market might head after the announcement. P.S. To let me know what you thought of today's article, send an e-mail to: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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