The overall demand fell for the seven-year T-notes auction because the FOMC meeting didn’t give any clarity regarding an interest rate hike in the future.
Portfolio positioning will depend on your interest rate outlook. So it’s important to keep track of where rates are headed. As we mentioned earlier, this is an active strategy that requires periodic monitoring and reinvestment.
The U.S. Treasury introduced two-year floating rate notes (or FRNs) in January. A FRN is a debt security. It’s interest payment varies. The interest rate usually references an interest rate benchmark.
Floating-rate notes (FLRN) are the Treasury’s most recent issue. Their first auction was held in January 2014. They offer you a term-to-maturity of two years.
Last week’s Treasury auctions included $13 billion two-year Treasury FRNs auctioned on May 28. The FRNs were indexed to the May 19 13-week Treasury bill auction high rate,.
In this part, we will discuss why the Fed has made changes to its forward guidance policies, which give investors information of the future path of the Fed funds rate.
The part discusses Yellen’s take on the monetary policy challenges, the role of qualitative and quantitative forward guidance since the Great Recession, and the recovery.
As with all investments, fixed income investments are subject to risks too. Bond prices increase when interest rates decline and decline when interest rates increase.
Other factors remaining constant, the higher the expected rate of inflation, the higher the required rates of return on both debt (AGG) and equity (VOO) investments, and vice versa.
