Higher Rates Are Here to Stay—or Are They?

Volatility has ruled the stock market since the 2021 bull market ended at the start of 2022. Stocks made a nice run during the first half of 2023 but have turned down into correction territory since the end of July. The recent decline in stock prices is tied to rising yields in the bond market. […] October 11, 2023 [Option Sensei] [Higher Rates Are Here to Stay—or Are They?]( Volatility has ruled the stock market since the 2021 bull market ended at the start of 2022. Stocks made a nice run during the first half of 2023 but have turned down into correction territory since the end of July. The recent decline in stock prices is tied to rising yields in the bond market. Higher bond yields were not what market pundits predicted a few months ago. In the debt markets, short-term interest rates are set by the Federal Reserve Board with its Fed funds rate. But long-term interest rates don’t work that way. And that has huge implications for income investors… Market forces determine long-term interest rates. Bond prices change to adjust the current yield. The 10-year Treasury acts as the benchmark for long-term rates. In practice, the Federal government issues Treasury Bills with four maturities, ranging from four to 52 weeks. Treasury Notes are sold with maturities of 2, 3, 5, 7, and 10 years. Treasury Bonds are issued with 20 and 30-year maturities. With the Fed funds rate at 5.0% in early May, the 10-year Treasury was priced to yield 3.3%. As of October 4, the Fed Funds rate was just 0.25% higher, but the 10-year yield had climbed to 4.75%. The market has realized that the Federal government will need to issue huge amounts of debt in the coming years. The White House[ forecasts]( budget deficits of at least $1.5 trillion for the next decade—or longer. In addition, $7.6 trillion of U.S. government debt will mature next year and need to be refinanced. All the new debt will be issued at much higher yields than the government has paid over the last decade. The government will be forced to pay higher, more attractive yields to place that much new debt into the market. Gone are the days when 10-year notes could be issued with 2% to 3% yields. I have seen forecasts for the 10-year yield to go as high as 7%. As a result, even if the Fed cuts short-term rates next year, longer-term rates will likely be elevated. Higher long-term interest rates make bond and bond fund investing a viable part of your investment strategy. The Invesco BulletShares series of bond funds have the unique feature of holding bonds of a specified year until the bonds mature and pay off. For example, the Invesco BulletShares 2025 High Yield Corporate Bond ETF (BSJP) holds a portfolio of… Continue reading at [INVESTORSALLEY.com]( SPONSOR [Top 5 EV Tech Stocks to Buy for 2023 + 10 "Must-Have" Stocks to Buy Now]( The electric vehicle boom is accelerating - and fast. According a new report published by BloombergNEF, annual spending on passenger EVs hit $388 billion in 2022, up 53% from the year before. Like we said, the boom is accelerating - and the time to buy EV-related tech stocks is now. Get our free report, "Top 5 EV Tech Stocks to Buy for 2023" along with preferred offer: 10 "Must-Have" Stocks to Buy Now. [Click here to sign up for our FREE Report & get directed to the Special Offer "10 "Must-Have" Stocks to Buy Now"]( NOTE: If URLs do not appear as live links in your e-mail program, please cut and paste the full URL into the location or address field of your browser. [Privacy Policy]( | [Terms & Conditions]( This is a paid advertisement.This is not a solicitation for the purchase or sale of securities. Readers are encouraged to conduct their own research and due diligence, and/or obtain professional advice, prior to making any investment decision. Advertisements and sponsorships are provided as a service to Wealthpop users . Wealthpop is not responsible for their content, services or products. The statements and opinions contained in this advertisement are not those of Wealthpop, and Wealthpop disclaims any liability for or arising from such statements and opinions. You are hereby advised that Wealthpop is receiving a fee as compensation for the distribution of this advertisement. [Click here to unsubscribe]( Copyright © 2023 Wealthpop. All rights reserved. Magnifi Communities, 1 Penn Plaza, Suite 3910, New York, NY 10019