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The Federal Reserve’s Influence in on Short-Term Rates
Treasury Yield Curve as of June 30, 20151
This chart is for illustrative purposes only and does not reflect the performance of any Franklin Templeton fund. Past performance does not guarantee future results.
In general, interest rates typically rise in a thriving economy, and in a sluggish economy, they tend to drop. But it’s important to note that short-term and long-term rates don’t necessarily move in tandem.
The Federal Reserve controls the Federal funds target rate, which in turn influences the market for shorter-term debt securities. While longer-term interest rates are more influenced by a variety of market forces.
What does that mean for investors?
When interest rates go up, bond prices go down (and vice versa). That means the share price of a fixed income mutual fund may move up or down, depending on movements in interest rates and their effect on the value of bonds held in the fund’s portfolio.
Find out whether all fixed income sectors react the same way to interest rate changes.
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For more information on any of our funds, contact your financial advisor or download a free prospectus. Investors should carefully consider a fund’s investment goals, risks, sales charges and expenses before investing. The prospectus contains this and other information. Please read the prospectus carefully before investing or sending money.
1. Source: Bloomberg, Federal Reserve. See www.franklintempletondatasources.com for additional data provider information.
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