The Fed lowers rates to rescue the economy from recessions. Then it raises rates to “take away the punch bowl” just when the party starts to get rowdy. While the U.S. economy is far from raucous and rowdy, it is recovering enough to start pondering the inevitable. If you own bonds, get ready to say goodbye to the punch bowl.
As you can see from the red line in the chart below, the interest rate on ten-year Treasury securities during more normal times between 2003 and 2007 ranged from 3 to 5 percent. Fed bond buying has driven the yield down to 1.8 percent in recent weeks.
Read more...Farewell to the Punch Bowl | the Blog of the Real Estate Center
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