Introduction
The Federal Reserve's decision to raise interest rates for the first time in nine years has sent yields on U.S. government bonds higher, but it has also sparked market fears of an economic slowdown and a possible recession. Investors are already looking for other places to park their money as they await the impact from the Fed's action and its future moves.
lower-risk debt.
Investors are shunning riskier assets, and the Fed is pushing higher for longer. The interest rate on the 10-year Treasury note climbed to 3.48% this week, its highest level in five years. That's good news for investors who want to lock in low rates now rather than later, but bad news for those who rely on such investments as a hedge against inflation or recessions.
Investors' desire to avoid more volatile assets has driven up prices of some other safe things like bonds and gold while driving down prices in other areas like stocks (which tend to fall during periods when investors expect economic growth). As a result of these shifts—and ongoing concerns about global financial markets—investors have increasingly turned toward less risky investments like cash holdings or real estate loans that don't involve borrowing money from banks or governments at any point along their lifecycle."
As a result of these shifts—and ongoing concerns about global financial markets—investors have increasingly turned toward less risky investments like cash holdings or real estate loans that don't involve borrowing money from banks or governments at any point along their lifecycle.
It's not just a U.S. story: yields in countries including Germany, Japan and Switzerland are also
The Fed is raising rates to keep inflation in check and prevent the economy from overheating. But investors aren't buying it: The U.S. economy is doing well, but there are concerns about the global economy, which could lead to higher interest rates for years to come.
Yields in countries including Germany, Japan and Switzerland are also rising as investors shy away from riskier assets like stocks or bonds that pay higher returns than Treasury bills (which are basically a promise by the government to pay you back). Yields rise when prices fall—in other words if your bond pays you 5% interest per year then its price must increase by more than 5% each year just to keep up with inflation (the rate at which prices are increasing). If they don't do that then they're losing money!