We’re damn near at 7% on 30 years now.
The Federal Reserve approved the largest interest rate increase since 1994 and signaled it would continue lifting rates this year at the most rapid pace in decades as it races to slow the economy and combat inflation that is running at a 40-year high.
Officials agreed to a 0.75-percentage-point rate rise at their two-day policy meeting that concluded Wednesday, which will increase the Fed’s benchmark federal-funds rate to a range between 1.5% and 1.75%.
The rate increase departed from unusually precise guidance delivered by many members of the rate-setting Federal Open Market Committee in recent weeks indicating they would raise rates by a smaller half percentage point, as officials did at their meeting last month. The committee vote was 10-1, with Kansas City Fed President Esther George dissenting in favor of a half-percentage-point increase.
New projections showed all 18 officials who participated in the meeting expect the Fed to raise rates to at least 3% this year. The median projection would lift the fed-funds rate to around 3.375%, or by an additional 1.75 percentage point over the following four meetings this year. Most officials had projected in March that they would raise rates to at least 1.875% this year.
After Powell said two months ago that they wouldn’t do 0.75% hikes.
so they announce a .75% hike like people thought and stonks go up because they pinky sweared they wouldn’t do that again
Personally I’d rather see them be more flexible on this stuff, rather than be pinned down by things they said two months ago. A lot can change in two months.
they’re not pinned down by anything they say at any point but people will hang on their words cause reasons
kinda like people do with trump really
Powell is painfully careful about always saying their moves are subject to new info.
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Fuck it, I’m on the sideline for buying a house in a HCOL area with these interest rates. Maybe I’ll find somewhere I can pay cash like Oklahoma or some shit.
Eh, maybe wrong thread for this comment but all these threads kinda blend together anyway.
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So I’m now reading articles about how the stock market wants rate hikes… Uhh, what?
well idk what you read but that makes no sense at all
only case you can even try to come up with is a psychological one to qwell the doom fears cause now we’re fighting inflation
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You could tell a story that the stock market doesn’t like inflation, and the market likes rate hikes insofar as they expect them to slow inflation
Markets like what they had for decades - low low borrowing costs, no inflation surprises, oppressed workforces. Ah, the good old days of 2000-2020.
Also ludicrously favorable tax policy
Man one thing that has baffled me this year, is I thought a scenario with high inflation and declining stocks was likely to happen and moved some of my 401k into this Blackrock U.S. Treasury Inflation Protected Securities Index fund which I though would be the best thing for this scenario. It’s down 9.25% YTD.
Could someone explain how are inflation protected bond funds doing bad? Is this just because of fed raising rates cratering all bonds issued at yesterday’s yields? But then when do inflation protected bonds ever make sense if the Fed will always raise rates in the face of high inflation.
Not sure of what you bought exactly, but when you buy a bond, rates going up means current value goes down.
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I assume you are talking about TIPS. They are like other bonds that can be traded on the secondary market. The difference is that instead of having a fixed interest rate like a T-bill, they have an interest rate that depends on inflation. So if inflation goes up, you get higher nominal interest payments. But if interest rates go up, the price on the secondary market has to fall in order to make the yield attractive relative to newer issues with higher rates. The price on the secondary market doesn’t really matter if you plan to hold the bond through maturity. You’ll get the same interest payments regardless of the price.
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Exactly, but I am not buying the bond itself. I am buying a fund in my 401k, that owns many of these type of bonds. They don’t show tickers but I believe it is the same or some minor variant of BPRIX.
Why would that be going down 10% this year? Shouldn’t the value of the bond fund reflect the increased future interest payments as interest rates go up?
If a period of high inflation and declining equities is not the right time to own that when could it ever make sense?
Setting aside the inflation indexing on TIPS coupon payments, this is exactly backward. When interest rates rise, the present value of future coupon payments on the bond you own in the fund does down, so the fund value will be lower. But you are right that starting from this lower present value, the fund would be expected to earn more in interest payments going forward.
Yeah I typed interest rates but meant inflation rates, thanks anyway. I just assumed as long as inflation was high relative to interest rates the bonds would do well.
Like if the bond is worth X at 2.5% inflation and 0% interest rates it should be worth more than X at 8% inflation and 3% interest rates because the spread is bigger
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