What Drives Interest Rates

Should I Be Concerned about Rising Interest Rates?

The Federal Reserve’s Influence in on Short-Term Rates
Treasury Yield Curve as of June 30, 20151


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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Rising Rates—What You Need To Know

Interest rate sensitivity can vary quite a bit across the fixed income universe. Learn how in this brochure.

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What Drives Interest Rates

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