investing

2014 bond rates forecast

Bondholders face a difficult time

This year may see slightly higher rates on certificates of deposit. The odds of that improved dramatically after actions taken by the Federal Reserve at its December rate-setting meeting when it decreased monthly asset purchases by $10 billion.

In December, the Fed took its first step in tapering its monthly asset purchases by paring them by $10 billion, to $75 billion.

The central bank is likely to raise the federal funds rate in 2015, according to Dan Geller, senior vice president of Market Rates Insight, a pricing consultant to banks. Based on historical patterns, he believes that could lead to a "modest and gradual increase in deposit rates in the second half of 2014," he wrote in a newsletter to his clients.

Bonds will tell a different story next year. In December, the Fed took its first step in tapering its asset purchases from $85 billion to $75 billion in mortgage-backed securities and Treasuries that it's been buying each month. It's a dangerous time for bondholders, says William Larkin, fixed-income manager at Cabot Money Management in Salem, Mass. As yields rise, the bond prices fall.

"At some point, you have to be defensive and say I have to do something different, step out of the way and let the market get to a market-driven rate environment. We're in a price-controlled market," he says.

advertisement

          Connect with us
advertisement
CD & INVESTING NEWSLETTER

Learn the latest trends that will help grow your portfolio, plus tips on investing strategies. Delivered weekly.

CDs and Investment

How should my teen invest $150K?

Dear Dr. Don, My son will turn 18 years old in December. He has $150,000 from a settlement now sitting in the bank. What is the best plan to pursue for investing this money? Is investing in precious metals a good way to... Read more

advertisement

Blog

Allison Ross

Bitcoin takes to YouTube with video

In the latest attempt to bring bitcoin to the masses -- or perhaps just to ruin another Billy Joel song through parody -- a bitcoin-themed spoof of "Uptown Girl" has made its way to YouTube audiences. The video, called "Bitcoin Girl," is produced by the nonprofit Moving Picture Institute and stars Naomi Brockwell, who works  ... Read more

Partner Center
advertisement

Connect with us