Commodities Futures and Options Brokerage

Paragon Commentary

Interest Rates Booming

Oct 07, 2018

Interest rates are on the rise, with some measures reaching the highest level in almost a decade.

The Federal Reserve raised interest rates by 0.25% last week, the third time this year. The Fed is expected to raise rates one more time this year, and more in the future, as Jerome Powell, the Federal Reserve Chair, has stated that rates are “a long way from neutral.” These expectations sent futures markets into a tizzy, raising expectations for interest rates on government bonds, mortgages, auto loans, and even savings accounts.

This created concerns for current owners of bonds, as the rates they receive will feel low compared to future high rates, which caused investors to dump existing government bonds and notes, pushing their value to multiyear lows. Meanwhile, stock markets tumbled from all-time highs this week as traders grew concerned about the impact of high interest rates on companies’ borrowing costs in the future.

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