TSX ETF Investor Centre
Senior Loans: Rising Rates, Rising Coupons
On June 16, 2022, the U.S. Federal Reserve announced a 75-bps interest rate hike – the largest rate hike since 1994, bringing the Federal Funds target rate to 1.5-1.75%. Meeting participants (Federal Reserve Board members & Federal Reserve bank presidents) projected a median Fed Funds rate of 3.4% by year-end 2022, suggesting that interest rate hikes are likely to continue through the balance of 2022 and beyond in an attempt to control rising inflation.
Un-Yielding Duration & What To Do About It
On September 30, 1981 the 10-year US Treasury yield peaked at 15.8%, turned a corner, and began its 40+ year descent to sub-1% levels. Looking back it’s hard to believe that in 1981 the U.S. Treasury (the safest credit in the world) had to pay almost twice as much to borrow funds as the riskiest corporate borrower does in 2022.