Vicky Ge Huang

speaker

80 appearances 2 recordings 1 series first heard Nov 2022 last heard Sep 2024

Vicky Ge Huang’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · As Interest Rates Fall, Bonds Become a More Attractive Investment · 26 Sep 2024 podcast

Bonds historically are considered to be the safer option.

and more boring part of an investor's portfolio, there is definitely the risk of loss, especially in corporate bonds.

But in the treasury space, bonds are considered nearly risk-free.

So lower interest rates boost bonds because we have bonds that were already issued in the past when interest rates were high.

So those bonds were issued with higher interest.

interest payments.

So those bonds pay more interest income to you as an investor.

And when the Fed lowered interest rate last week, the short-term interest rates became lower.

So we have newer bonds that are issued with lower interest rates.

And this means that the existing bonds that were issued with higher yields or higher interest payments

all of a sudden became a lot more attractive to investors.

So those demands help drive up the price of those existing bonds.

Yes.

If the Fed continues to lower short-term interest rates, we could see investors going into intermediate-term or even longer-term bonds more and more.

So far, a lot of investors for the past few years have piled into short-term treasuries and cash-like investments such as money market funds because short-term interest rates have

have been historically high for the past few years given the Fed's campaign to raise interest rates and combat inflation.

If the Fed continues to lower interest rates, the interest income that investors are able to earn from short-term treasuries and other cash-like holdings will shrink as interest rates become increasingly lower.

So stocks are basically an investor's bet on how the company might fare in the future.

So investors who buy the stock of a company are betting on how well the company can perform.

And they basically stand to lose money.

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