If you are prepared for some risk, junk bonds pay about 5%, but they tend to get whacked when interest rates rise. Same with lower-yielding but higher-quality corporate bonds.
To finance deficits, the government must sell bonds to investors, competing for capital that could otherwise be used to invest in stocks or corporate bonds. Government borrowings raise long-term interest rates, stifling economic growth.
The real challenge was to model all the interest rates simultaneously, so you could value something that depended not only on the three-month interest rate, but on other interest rates as well.
The impact of low interest rates is broad and deep. Many Americans rely on interest income from their savings to help cover their cost of living.
See the investment world as an ocean and buy where you get the most value for your money. Right now the value is in non-callable bonds. Most bonds are callable so when they start going up in price, the debtor calls them away from you. But the non-callable bonds, especially those non-callable for 25-30 years, can go way up in price if interest rates go way down.
Public borrowing is costly these days, true, but interest rates on municipal bonds are still considerably lower than those borne by corporate debt.
When interest rates are high you want the average direction in which interest rates are moving to be downward; when interest rates are low you want the average direction to be upward.
The degree of monetary policy ease should be associated with the level of real interest rates, not nominal interest rates.
Stock price multiples are negatively correlated with real interest rates. As interest rates rise, the market multiple will fall.
And so Fannie Mae produces very strong results for investors in - when interest rates are high and when interest rates are low, in recession and during booms.
A higher IOER rate encourages banks to raise the interest rates they charge, putting upward pressure on market interest rates regardless of the level of reserves in the banking sector. While adjusting the IOER rate is an effective way to move market interest rates when reserves are plentiful, federal funds have generally traded below this rate.
Let's have honest interest rates. Let's let the free market set interest rates in that zone where supply of savings is matched up with demand for real borrowing for capital projects.
Lower interest rates are usually considered good for stocks because they lower the cost of borrowing and make bonds a less attractive alternative investment.
I do like low interest rates. I'm not making that a big secret. I think low interest rates are good. I like a dollar that's not too strong. I mean, I've seen strong dollars. And frankly, other than the fact that it sounds good, lots of bad things happen with a strong dollar.
I think we have a bubble in the US in government bonds, because of the quantitative easing and the negative real interest rates, and to some extent, that increases asset values across the board, including in startups.
For too long, our nation has relied on low interest rates rather than undertaking the necessary long term necessary economic reforms.