Basis Points: Increases in Short-Term Interest Rates
Minneapolis, MN | August 4, 2022 | Georgina Walleshauser, Assistant Vice President
The Federal Reserve raised interest rates again last week by 0.75%. Movements in the fed funds rate are closely related to short-term treasury rate movements. Historically and as shown in the graph below, the timing of increases to treasury interest rates has occurred leading up to (rather than following) the recent FOMC meetings when the fed fund rate hikes occur.
The inversion of the treasury yield curve suggests these elevated short-term rates aren’t expected to persist forever. While the weighted average forecast for the 2-year treasury shows slight decreases in the graph below, it remains uncertain whether treasury interest rates will continue to increase or decrease in the near future. Nevertheless, short-term rates currently remain high and allow for considerable benefit from the reinvestment of bond proceeds.
Below we show generic current reinvestment rate indications. We encourage you, as always, to reach out to your Blue Rose advisor for a tailored reinvestment indication to your specific fund(s) and discussion of the risks and benefits to each type of reinvestment structure.
*Indicative rates as of August 3rd, 2022.
Meet our Author:
Georgina Walleshauser, Assistant Vice President | 952-746-6036
Georgina Walleshauser joined Blue Rose in 2017 as an Analyst, providing modeling, analytics, market data, and research in support of the delivery of capital planning, debt and derivatives advisory, and reinvestment services to our clients. In the role of Associate, she utilized her experience as an Analyst in a more client-facing role, while still performing much of the analysis utilized in this capacity. In her role of Assistant Vice President, she will be tasked with growing client management responsibilities, in particular ensuring that our clients’ transactions run smoothly through closing.
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