Long rates remained stubbornly low despite all indicated that they would have to increase in the future. Now, once more, experts are anticipating the beginning of the end of the smart and low - rate environment businesses are taking advantage of low rates until they disappear.
An important meeting
The Federal Reserve has met yesterday and today for its scheduled meeting set the monetary policy. For years, the Fed has kept the lowest possible interest rate, and add more fuel to the pompe monetary stimulus of its quantitative relaxation programs.
But, increasingly, the signs are pointing to a possible end to this super-accommodative stance. Internal discord in the Fed is that some members would prefer to see the last series of quantitative easing end sooner than later. The dollar probed new lows against most currencies keys, such as the competing economies now see investors as the increase in rates at a faster rate than the United States, which makes investing in assets denominated in euro more attractive than wordings of the pressures and euroet area of exchange rates. Although investors were willing to accept negative real returns guaranteed on indexed on the inflation of Treasury bonds recently, and will not likely last forever - especially if inflation continues to steam.
five companies do the right thing
With that background, several companies have made new bond offerings this week in the hope of the rate lock down until the Fed later takes the punch bowl. Among them:
In addition, Bloomberg reported that loan companies such as blackstone Group (NYSE: BX - News) have saved hundreds of millions of dollars that their subsidiary private companies has refinanced their debt at much lower rates in the first quarter.
Following the trend
Of course, these companies are enjoying the benefits of lower rates first. Last summer, rate falling to rates historically low, several large corporate borrowers rushes to lock a cheap financing.
For many companies, it is a matter of survival to raise capital. While many companies are huge amounts of cash sitting on their balance sheets, others are not in a stronger position financially. Still less poor accounting firms are willing to let their competitors of rich cash to walk above making strategic acquisitions or other purchases of goods, they must be able to join the tender when redemption opportunities. Staging now by just logical low rate lock.
What goes down must go...
In the meantime, if rates rise quickly enough, they can finally investors to buy these bonds of issuers. As long as you hold a bond to maturity, you will not see any capital loss, but the opportunity cost to lock your money which proves to be a low rate is a clear disadvantage. Also, if you invest in iShares iBoxx Investment Grade Corporate (NYSE: LQD - News) or American Barclays High Yield (NYSE: JNK - News), higher rates generally bring reductions in prices for the ETF shares and the mutual funds - of losses that you necessarily retrieveSince the funds often buy and sell bonds before maturity.
At the same time, rising rates are not all bad. Savers were punished by the position of low Fed rates, but if the rates on CDs and other productive investment income go up, then these investors will get at least a little bit of relief.
Even if the Fed signals today that higher rates will come, signs suggest that he Act probably quickly. Accordingly, you may some time before having to worry about the impact of rates higher on your finances. However, doing so now some planning could help prevent a much more painful result later.
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Contributor Fool Dan Caplinger tries to make the most of every opportunity. It is not owner of the shares of the companies mentioned in this article. AT & T is a selection of Motley Fool inside value. Try our services Foolish newsletter free of charge for 30 days. Us Fools can not all hold the same views, but we believe that treat a wide range of ideas makes us better investors. Policy on the disclosure of the idiot gives you the most.
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