subscribe to our newsletter
Fed likely to raise funds rate in September

Fed likely to raise funds rate in September

The US Federal Reserve is likely to raise the Federal funds rate by 0.25 per cent at its September meeting, according to BondAdviser.

The research firm explained that given recent movements in the US 10-year bond rate, which climbed from 1.52 per cent to 1.73 per cent in the week ending 15 September, it is “not unreasonable” to think a 0.25 per cent hike has already been priced in to the market.

“If this turns out to be the case, then Australian bond investors should not be overly fearful of future US interest rate increases as most core Australian fixed-income funds are benchmarked against the Bloomberg AusBond Composite +0 Years Index,” the firm said.

The Bloomberg index’s yield to maturity of 2.1 per cent and average duration profile of 5 years mean interest rates would need to rise a full 1 per cent within a period of 12 months for the index to decline “by approximately 3 per cent”, BondAdviser said.

“Overall, we anticipate that the Federal Reserve will begin tightening monetary policy again soon, although we generally expect rates to rise progressively.

“This gradual process should ultimately allow investor expectations to shift and as a result we expect bond market volatility to remain limited relative to equity markets,” the research firm said.

Fed likely to raise funds rate in September
mortgagebusiness logo

Latest News

Too much red tape in the mortgage industry can actually leave consumers in a worse position, as some markets are starting to discover. ...

Chairman of J.P. Morgan Australia Robert Priestley has resigned from the ASX board, effective immediately, citing the “distraction” of t...

Macro-prudential measures imposed by the regulator in 2014 are beginning to take the heat out of the apartment market, with conditions expec...

Promoted Stories

podcast

LATEST PODCAST: How the market has changed in the last 25 years, royal commission hearings, broker advocacy

Do you expect access to credit to get harder this year?