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1. STOCK MARKET

The Stock markets and interest rates have an inverse relationship (most of the time). When investors are putting money into the Stock market that’s doing well, money moves out of Bonds causing prices to drop, pushing interest rates higher.

Rates Go Up

  • Stock market on the rise

Rates Go Down

  • Stock market in decline

Rates Go Up

  • Non-farm payrolls higher than expected
  • Unemployment rate goes down
  • Better than expected economic growth

Rates Go Down

  • Job data stagnant or in decline
  • Manufacturing stagnant or slowing
  • Housing weaker than expected

2. ECONOMY

The Employment Report is released on the first Friday of each month by the Bureau of Labor Statistics and is considered the most important of all economic indicators because it provides a first look at the current economic. Rates reflect the relative strength or weakness of these factors on a day-to-day basis.

3. THE FED

The Federal Open Market Committee meets eight times per year in order to determine the near-term direction of monetary policy. By controlling the flow of cash through the economy, the Fed attempts to keep inflation under control.

Rates Go Up

  • Pulling money out of the monetary system usually indicates inflation is either here or anticipated by the Fed

Rates Go Down

  • Adding cash to the monetary system creates a looser credit environment in an attempt to stimulate the economy through borrowing and expansion

Rates Go Up

  • Higher Consumer Price Index
  • Higher wholesale prices
  • Hourly earnings higher

Rates Go Down

  • Lower consumer prices
  • Lower wholesale prices
  • Hourly earnings lower

4. INFLATION

Low interest rates depend on low inflation, which causes both wages and prices to rise across the board and the cost of borrowing to get more expensive. Good news for the economy is often bad news for interest rates.

5. GEO-POLITICS

Investors often turn to the U.S. markets as a safe haven for investing whenever things go wrong in the world. The relative stability of our markets provides a “safe haven” in times of global crisis.

Rates Go Up

  • China’s GDP improves
  • Middle East tensions ease

Rates Go Down

  • European economy sinks
  • Conflicts or acts of terror

Rates Go Up

  • A serene landscape around the globe with little catastrophic weather or events

Rates Go Down

  • Hurricanes
  • Typhoons
  • Tsunamis
  • Earthquakes

6. WORLD EVENTS

Again, what’s good for the world is also bad for Bonds. But when investors are attracted to our markets for safety, the flood of investment creates a favorable environment for interest rates.