Why Are Long-term Rates Lower Than Short-term Rates? Interest Rates and Duration There are two primary reasons why long-term bonds are subject to greater interest rate risk than short-term bonds: There is a greater probability that interest rates will rise (and thus negatively affect a bond’s market price) within a longer time period than within
How A Fed Rate Hike Could Affect Your Wallet? The Fed’s hike is expected to increase credit card interest rates from about 16% to 17%. If you make only the minimum payment each month, the total debt could increase by $300-$400. Student loans, auto loans, and other types of debt could also be affected. Bonds
How Interest Rate Hikes Affect Short And Long-Term Bonds? When interest rates rise, bond prices fall (and vice-versa), with long-maturity bonds most sensitive to rate changes. This is because longer-term bonds have a greater duration than short-term bonds that are closer to maturity and have fewer coupon payments remaining. Do interest rates affect short-term bonds?