The government recently announced a $600 billion bond buying program to attempt to hold down interest rates. Despite this stimulus, bond yields have risen recently which will drive up interest rates on everything from new mortgages to short term lines of credit. Business owners should be proactive to protect themselves from rising interest rates by avoiding variable rates whenever possible. There are a few possible outcomes depending on what the fed does.
- If investors and overseas nations lose confidence in the bond market yields will increase further...making interest rates jump substantially. Either the federal government then prints more money as part of a stimulus plan to buy more bonds...in affect to hold down the rate or consumers/business owners are stuck with unattractive interest rates. Either way it is a dangerous time to hold a significant amount of variable rate interest debt.
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