Personal Finance and Investing

pangaia

(24,324 posts) Mon Dec 31, 2018, 08:14 PM Dec 2018

Why, if the FED rate has been going up, and a couple more hikes

are, as of now, planned for 2019, did Treasuries and bank CD rates start dropping so fast in the last few weeks?

Thanks,

9 replies

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Why, if the FED rate has been going up, and a couple more hikes (Original Post) pangaia Dec 2018 OP

running of the bulls? juxtaposed Dec 2018 #1

Where'd you get that? CD rates have been gradually going up. brush Dec 2018 #2

One example, my last 1 year Bank Of China CD paid 2.75%, bgt on 12/18 pangaia Jan 2019 #8

bank savings all the way up to...ONE percent lol nt msongs Dec 2018 #3

As stocks decline, people pour their money into safer investments like Treasuries progree Dec 2018 #4

I kind knew the basics of that but didn;t realize it also applied to T-Bills and T- Bonds pangaia Jan 2019 #7

Supply/demand. Investors pull money out of stocks and buy treasuries, so yields can go down. PSPS Dec 2018 #5

I Have 2 Adjustable Loans The Fed Hikes Hurt Bad PaulX2 Dec 2018 #6

That really sucks. It was rising interest rates that popped the 2007 housing bubble progree Jan 2019 #9

juxtaposed

(2,778 posts)

1. running of the bulls?

Reply to pangaia (Original post)

Mon Dec 31, 2018, 08:17 PM

Dec 2018

brush

(57,086 posts)

2. Where'd you get that? CD rates have been gradually going up.

Reply to pangaia (Original post)

Mon Dec 31, 2018, 08:19 PM

Dec 2018

pangaia

(24,324 posts)

8. One example, my last 1 year Bank Of China CD paid 2.75%, bgt on 12/18

Reply to brush (Reply #2)

Wed Jan 2, 2019, 10:06 AM

Jan 2019

Today a 1 year Bank Of China CD pays 2.65%.
JP Morgan Chase(BOOO) was 2.7% but not call protected, so I bought a Wells Fargo (BOOO) at 2.65%-- 13 months..

msongs

(69,951 posts)

3. bank savings all the way up to...ONE percent lol nt

Reply to pangaia (Original post)

Mon Dec 31, 2018, 08:31 PM

Dec 2018

progree

(11,463 posts)

4. As stocks decline, people pour their money into safer investments like Treasuries

Reply to pangaia (Original post)

Mon Dec 31, 2018, 08:59 PM

Dec 2018

The S&P 500 high was Sept 20 (2931) ... and a very bad December -- from 2760 to 2507, a 9.2% decline in December.

A lot of people and institutions buying Treasuries pushes up their prices, which pushes down their yields. Yields move in opposite direction to prices.

Also, there has been some disappointing economic news in the last few days. Weaker economic expectations tend to push down yields.

Here's some Treasury yields. Note there wasn't a drop in yields over December for maturities less than a year, and even increases at the lower maturity end -- these are the most affected by changes in the Fed Funds rate.
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/textview.aspx?data=yield

Also, before the December 19 Fed Funds rate hike, there were near-certainty expectations of the December hike, and expectations that there would be 3 rate hikes in 2019. These were to some degree already priced into the market.

In the December 19 meeting, expectations were reduced from 3 to 2 rate hikes in 2019, putting a bit of a downdraft on yields that would be affected by 2019 rate hikes (several months out and more).

People sell stocks on the dips when they should be buying on the dips.

pangaia

(24,324 posts)

7. I kind knew the basics of that but didn;t realize it also applied to T-Bills and T- Bonds

Reply to progree (Reply #4)

Wed Jan 2, 2019, 10:01 AM

Jan 2019

Thanks

PSPS

(14,100 posts)

5. Supply/demand. Investors pull money out of stocks and buy treasuries, so yields can go down.

Reply to pangaia (Original post)

Mon Dec 31, 2018, 10:10 PM

Dec 2018

PaulX2

(2,032 posts)

6. I Have 2 Adjustable Loans The Fed Hikes Hurt Bad

Reply to pangaia (Original post)

Mon Dec 31, 2018, 11:31 PM

Dec 2018

My payment went from 1200 to 1800.

Not happy.

progree

(11,463 posts)

9. That really sucks. It was rising interest rates that popped the 2007 housing bubble

Reply to PaulX2 (Reply #6)

Wed Jan 2, 2019, 10:20 AM

Jan 2019

It's not solely to blame, not by a long shot. There were so many excesses in the housing and mortgage markets before then -- liar loans for anyone who could fog a mirror, the bond rating agencies like Moody's and S&P rating bundles of these mortgages as AAA, mortgages sold with low teaser rates and people were qualified based on these low teaser rates, and not the rates they would be paying 2 years later after the teaser period was over, derivatives, etc. etc.

So there was a huge huge bubble waiting to burst. But the pin prick that burst the bubble was the rising interest rates that caused ARM mortages to adjust upward and upward and defaults began accelerating and boom.

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