The Fed’s “liftoff.” As we get closer to the Fed raising its benchmark rate later this year, interest rates will probably move higher. A measured tightening pace is expected, and most of the pressure will be on the short end of the yield curve. However, long-term rates will still be affected.
A strong U.S. economy. We are seeing increased credit demand from businesses and, to a lesser extent, from households as economic conditions improve in the United States. Higher demand for capital will buoy rates.
The bottom line: While we still expect the low-yield world to persist throughout 2015 and probably next year as well, U.S. long-term interest rates are likely to gradually climb back to where they were early last year… just when everyone got it wrong.
Source: Bloomberg
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock. He is a regular contributor to The Blog and you can find more of his posts here.