Wednesday, January 21, 2009

Rates Are On The Rise

The last week has been a tough week for rates. Why is it that rates are rising when there continues to be, primarily, nothing but bad news released? Well, that is not a short answer, but it is interesting (or at least it is to our sick little minds).
In the past, rates have followed 10 year bonds. As bonds were up (or the yield was down; they move opposite of each other)then rates were down. But rates have stopped following bonds so definitively. We are not sure exactly what they are following right now, to be honest. But we are looking into that.
The problem right now is as our government continues to bail businesses out that increases the debt the Treasury needs to sell. The typical buyers for that debt is other countries. Well, those countries have their own problems right now and are spending their money on their own country's problems right now. That means we are having a hard time finding people to buy our debt and, therefore, fund all this debt. That is causing rates to rise, as a result. Here is a good summary of it in this article.

No comments: