In
terms of the interest rate risks, It's more of an opportunity cost than a real «hit from rising interest rates», assuming you hold to maturity.
Not exact matches
Interest rates on 15 - year mortgage
terms are typically lower than those on longer -
term loans because the shorter duration
of the loan makes it less
of a
risk to the lender.
Important factors that could cause actual results to differ materially from those reflected in such forward - looking statements and that should be considered in evaluating our outlook include, but are not limited to, the following: 1) our ability to continue to grow our business and execute our growth strategy, including the timing, execution, and profitability
of new and maturing programs; 2) our ability to perform our obligations under our new and maturing commercial, business aircraft, and military development programs, and the related recurring production; 3) our ability to accurately estimate and manage performance, cost, and revenue under our contracts, including our ability to achieve certain cost reductions with respect to the B787 program; 4) margin pressures and the potential for additional forward losses on new and maturing programs; 5) our ability to accommodate, and the cost
of accommodating, announced increases in the build
rates of certain aircraft; 6) the effect on aircraft demand and build
rates of changing customer preferences for business aircraft, including the effect
of global economic conditions on the business aircraft market and expanding conflicts or political unrest in the Middle East or Asia; 7) customer cancellations or deferrals as a result
of global economic uncertainty or otherwise; 8) the effect
of economic conditions in the industries and markets in which we operate in the U.S. and globally and any changes therein, including fluctuations in foreign currency exchange
rates; 9) the success and timely execution
of key milestones such as the receipt
of necessary regulatory approvals, including our ability to obtain in a timely fashion any required regulatory or other third party approvals for the consummation
of our announced acquisition
of Asco, and customer adherence to their announced schedules; 10) our ability to successfully negotiate, or re-negotiate, future pricing under our supply agreements with Boeing and our other customers; 11) our ability to enter into profitable supply arrangements with additional customers; 12) the ability
of all parties to satisfy their performance requirements under existing supply contracts with our two major customers, Boeing and Airbus, and other customers, and the
risk of nonpayment by such customers; 13) any adverse impact on Boeing's and Airbus» production
of aircraft resulting from cancellations, deferrals, or reduced orders by their customers or from labor disputes, domestic or international hostilities, or acts
of terrorism; 14) any adverse impact on the demand for air travel or our operations from the outbreak
of diseases or epidemic or pandemic outbreaks; 15) our ability to avoid or recover from cyber-based or other security attacks, information technology failures, or other disruptions; 16) returns on pension plan assets and the impact
of future discount
rate changes on pension obligations; 17) our ability to borrow additional funds or refinance debt, including our ability to obtain the debt to finance the purchase price for our announced acquisition
of Asco on favorable
terms or at all; 18) competition from commercial aerospace original equipment manufacturers and other aerostructures suppliers; 19) the effect
of governmental laws, such as U.S. export control laws and U.S. and foreign anti-bribery laws such as the Foreign Corrupt Practices Act and the United Kingdom Bribery Act, and environmental laws and agency regulations, both in the U.S. and abroad; 20) the effect
of changes in tax law, such as the effect
of The Tax Cuts and Jobs Act (the «TCJA») that was enacted on December 22, 2017, and changes to the interpretations
of or guidance related thereto, and the Company's ability to accurately calculate and estimate the effect
of such changes; 21) any reduction in our credit
ratings; 22) our dependence on our suppliers, as well as the cost and availability
of raw materials and purchased components; 23) our ability to recruit and retain a critical mass
of highly - skilled employees and our relationships with the unions representing many
of our employees; 24) spending by the U.S. and other governments on defense; 25) the possibility that our cash flows and our credit facility may not be adequate for our additional capital needs or for payment
of interest on, and principal
of, our indebtedness; 26) our exposure under our revolving credit facility to higher
interest payments should
interest rates increase substantially; 27) the effectiveness
of any
interest rate hedging programs; 28) the effectiveness
of our internal control over financial reporting; 29) the outcome or impact
of ongoing or future litigation, claims, and regulatory actions; 30) exposure to potential product liability and warranty claims; 31) our ability to effectively assess, manage and integrate acquisitions that we pursue, including our ability to successfully integrate the Asco business and generate synergies and other cost savings; 32) our ability to consummate our announced acquisition
of Asco in a timely matter while avoiding any unexpected costs, charges, expenses, adverse changes to business relationships and other business disruptions for ourselves and Asco as a result
of the acquisition; 33) our ability to continue selling certain receivables through our supplier financing program; 34) the
risks of doing business internationally, including fluctuations in foreign current exchange
rates, impositions
of tariffs or embargoes, compliance with foreign laws, and domestic and foreign government policies; and 35) our ability to complete the proposed accelerated stock repurchase plan, among other things.
To cover some
of the
risk, lenders charge higher
interest rates for longer
term loans.
It pointed to the continued presence
of fragile fixed - income market liquidity as a key vulnerability in the overall financial system, while it repeats the
risks of a sharp increase in long -
term interest rates, stress from emerging markets like China and prolonged weakness in commodity prices.
«Gold is stuck between $ 1,238 - $ 1,260 with the
risk to skewed to downside based on rising expected
interest rates and failure to break higher which has left it vulnerable to profit - taking in the short
term,» said Ole Hansen, the head
of commodity strategy at Saxo Bank.
Such
risks, uncertainties and other factors include, without limitation: (1) the effect
of economic conditions in the industries and markets in which United Technologies and Rockwell Collins operate in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices,
interest rates and foreign currency exchange
rates, levels
of end market demand in construction and in both the commercial and defense segments
of the aerospace industry, levels
of air travel, financial condition
of commercial airlines, the impact
of weather conditions and natural disasters and the financial condition
of our customers and suppliers; (2) challenges in the development, production, delivery, support, performance and realization
of the anticipated benefits
of advanced technologies and new products and services; (3) the scope, nature, impact or timing
of acquisition and divestiture or restructuring activity, including the pending acquisition
of Rockwell Collins, including among other things integration
of acquired businesses into United Technologies» existing businesses and realization
of synergies and opportunities for growth and innovation; (4) future timing and levels
of indebtedness, including indebtedness expected to be incurred by United Technologies in connection with the pending Rockwell Collins acquisition, and capital spending and research and development spending, including in connection with the pending Rockwell Collins acquisition; (5) future availability
of credit and factors that may affect such availability, including credit market conditions and our capital structure; (6) the timing and scope
of future repurchases
of United Technologies» common stock, which may be suspended at any time due to various factors, including market conditions and the level
of other investing activities and uses
of cash, including in connection with the proposed acquisition
of Rockwell; (7) delays and disruption in delivery
of materials and services from suppliers; (8) company and customer - directed cost reduction efforts and restructuring costs and savings and other consequences thereof; (9) new business and investment opportunities; (10) our ability to realize the intended benefits
of organizational changes; (11) the anticipated benefits
of diversification and balance
of operations across product lines, regions and industries; (12) the outcome
of legal proceedings, investigations and other contingencies; (13) pension plan assumptions and future contributions; (14) the impact
of the negotiation
of collective bargaining agreements and labor disputes; (15) the effect
of changes in political conditions in the U.S. and other countries in which United Technologies and Rockwell Collins operate, including the effect
of changes in U.S. trade policies or the U.K.'s pending withdrawal from the EU, on general market conditions, global trade policies and currency exchange
rates in the near
term and beyond; (16) the effect
of changes in tax (including U.S. tax reform enacted on December 22, 2017, which is commonly referred to as the Tax Cuts and Jobs Act
of 2017), environmental, regulatory (including among other things import / export) and other laws and regulations in the U.S. and other countries in which United Technologies and Rockwell Collins operate; (17) the ability
of United Technologies and Rockwell Collins to receive the required regulatory approvals (and the
risk that such approvals may result in the imposition
of conditions that could adversely affect the combined company or the expected benefits
of the merger) and to satisfy the other conditions to the closing
of the pending acquisition on a timely basis or at all; (18) the occurrence
of events that may give rise to a right
of one or both
of United Technologies or Rockwell Collins to terminate the merger agreement, including in circumstances that might require Rockwell Collins to pay a termination fee
of $ 695 million to United Technologies or $ 50 million
of expense reimbursement; (19) negative effects
of the announcement or the completion
of the merger on the market price
of United Technologies» and / or Rockwell Collins» common stock and / or on their respective financial performance; (20)
risks related to Rockwell Collins and United Technologies being restricted in their operation
of their businesses while the merger agreement is in effect; (21)
risks relating to the value
of the United Technologies» shares to be issued in connection with the pending Rockwell acquisition, significant merger costs and / or unknown liabilities; (22)
risks associated with third party contracts containing consent and / or other provisions that may be triggered by the Rockwell merger agreement; (23)
risks associated with merger - related litigation or appraisal proceedings; and (24) the ability
of United Technologies and Rockwell Collins, or the combined company, to retain and hire key personnel.
The
risk - free
interest rate approximates the yield on benchmark Government
of Canada bonds for
terms similar to the contract life
of the options.
The presentation suggested that such a facility would allow the Committee to offer an overnight,
risk - free instrument directly to a relatively wide range
of market participants, perhaps complementing the payment
of interest on excess reserves held by banks and thereby improving the Committee's ability to keep short -
term market
rates at levels that it deems appropriate to achieve its macroeconomic objectives.
All three
of these reasons — evidence that U.S. monetary policy is currently only moderately accommodative, the fact that U.S. financial conditions have been influenced by economic and financial market developments abroad, and
risk management considerations — argue, at the moment, for caution in raising U.S. short -
term interest rates.
I like the idea
of having gold for inflation
risk and long -
term treasuries for deflation but I can envision a future where
interest rates and inflation remain low for years which would be bad for returns on both.
In the mad scramble for loan creation during the final phase
of the Housing Bubble, the government created an environment
of essentially free money by allowing the big agencies, Fannie Mae and Freddie Mac (or Phony and Fraudie, as I often affectionately refer to them), to securitize loans to the bottom
of the barrel
risks with crazy
terms like no money down and incredibly low «teaser»
interest rates.
Although bonds generally present less short -
term risk and volatility than stocks, bonds do contain
interest rate risk (as
interest rates rise, bond prices usually fall, and vice versa) and the
risk of default, or the
risk that an issuer will be unable to make income or principal payments.
With Powell set to carry out the Fed's process
of raising short -
term interest rates and gradually unwinding a $ 4.2 trillion portfolio
of mortgage and Treasury securities, fixed - income investors are contending with big
risks.
We could take the $ 16 billion we have in cash earning 1.5 % and invest it in 20 - year bonds earning 5 % and increase our current earnings a lot, but we're betting that we can find a good place to invest this cash and don't want to take the
risk of principal loss
of long -
term bonds [if
interest rates rise, the value
of 20 - year bonds will decline].»
Each account is diversified across a variety
of sectors and maturities to help ensure it is not concentrated in any one area, can better handle changes in
interest rates, and can potentially help reduce overall
risk to principal over the long -
term.
The
risk - free
interest rate is based on the implied yield currently available on U.S. treasury notes with
terms approximately equal to the expected life
of the option.
Put simply, even taking account
of current
interest rate levels, and even assuming that stocks should be priced to deliver commensurately lower long -
term returns, we currently estimate that the S&P 500 is about 2.8 times the level at which equities would provide an appropriate
risk premium relative to bonds.
Risk Free
Interest Rates — These rates are based on the implied yield currently available on U.S. Treasury notes with terms approximately equal to the expected life of the op
Rates — These
rates are based on the implied yield currently available on U.S. Treasury notes with terms approximately equal to the expected life of the op
rates are based on the implied yield currently available on U.S. Treasury notes with
terms approximately equal to the expected life
of the option.
Long -
term treasuries will likely still work as ballast when it matters most (global
risk - off events), but we see short -
term U.S. debt now offering compelling income, along with a healthy buffer against the
risk of further
interest rate rises.
For variable - and fixed -
rate loans offered by private lenders,
interest rates will typically depend on the length, or
term of the loan, and the perceived credit
risk of the borrower.
Thus, we have generally been quite defensive with regard to
interest -
rate risk, while seeking to take advantage
of what we deem as the relative attractiveness
of currencies
of countries with fundamentals likely to support medium -
term growth.
One popular bond investing strategy is called «laddering» and provides a trade - off between lower
rates on short -
term bonds and higher
interest rate risk of long -
term bonds.
This is evident in a number
of developments, including: increased demand for higher -
risk assets; the increase in «carry trades» — a form
of gearing where funds are borrowed short -
term at low
interest rates and invested in higher - yielding assets, often in other countries; growth in alternative investment vehicles such as hedge funds; and growth in alternative investment strategies such as selling embedded options (see Box A).
As seen in prior cycles, changes in short -
term interest rates alone had yielded little effect on financial conditions, as buoyant
risk sentiment strengthened equities, corporate bonds, as well as various forms
of «esoteric» investments.
Therefore, subdued long -
term interest rates is both a catalyst for better
risk sentiment as well as a consequence
of central bank balance sheet expansion (namely ECB QE), which is in itself bullish
risk.
Although most types
of bonds share some common features, such as a fixed
interest rate and a maturity date, they are not all equal in
terms of income potential and
risk.
Given that China has higher
interest rates than the US, in the absence
of expectations
of a change in the target exchange
rate one would expect the forward exchange
rate (expressed as yuan per US dollar) to be higher than the spot exchange
rate so as to eliminate the possibility
of earning a
risk - free profit over the
term of the contract.
«There are concerns about the effects
of persistently low
interest rates and the quantitative easing that other countries have done, in
terms of increasing
risk - taking by financial market players and individuals.
There is no unique way
of calculating a real
interest rate because different borrowers pay different real costs
of borrowing, depending on the
term and degree
of risk of the loan.
Though there may be some
risk that the value
of the house, the income from a business, or the return on stocks will not turn out as hoped, the loan will be paid off in a specified amount
of time, and the
interest rate will be locked in for the
term.
By purchasing massive amounts
of high -
risk MBS and long -
term government bonds, the Fed helped lower longer -
term interest rates but steered credit away from private investment, which was also impeded by stricter macro-prudential regulations.
IGIH provides exposure investment - grade, US - dollar - denominated corporate bonds while minimizing
interest -
rate risk by shorting U.S. Treasurys that match in
terms of duration.
Interest rates,
terms and amounts vary based on
risk assessment and creditworthiness at the time
of application.
Interest rates could rise if this happens and the
terms and conditions
of a sell off mean the public would likely lose out while the companies involved take very little
risk.
They also administered three questionnaires to teachers asking them to
rate: 1) their perceptions
of students» imagination,
risk - taking, expression, and cooperative learning; 2) their school climate in
terms of affiliation, student support, professional
interest, achievement orientation, formalization, centralization, innovativeness, and resource adequacy; and 3) how much they integrate the arts, collaborate with arts specialists, and use the arts as a tool to teach other subjects.
Many other articles addressing this topic answer the question in
terms of what a specific generic
risk score means to the borrower: a low score means higher
interest rates, and a higher one means better
terms, etc..
Floating -
rate securities are designed to mitigate
interest rate risk by regularly adjusting to keep pace with the movements
of short -
term rates.
This is since the equity duration is based on a derivative
of the dividend discount model that uses long
term interest rates plus an equity
risk premium, but these models also rely on growth and inflation.
Of course, bond prices fall when
interest rates rise, and long -
term bonds are the most sensitive to this
risk.
With short -
term bond fund
rates between 0.5 % and 2 %, and intermediate -
term bond fund
rates between 1.5 % and 3.3 %, there is plenty
of downside
risk due to the potential for higher future
interest rates (bond prices fall when
interest rates rise), and not much upside potential due to the current low
rates.
In addition, bond funds investing in longer -
term securities carry higher levels
of interest rate risk.
The practice which allows credit card companies the ability to adjust
interest rates and
terms to one
of their customers if their
risk assessment has been changed due to their relationships with other lenders — failure to make timely payments, delinquencies, etc..
When finance companies or banks make any type
of loan they base the
interest rates and
terms on the perceived
risk factors
of the applicant.
The long -
term expected return on stocks may be 6 % to 8 % before taxes, but paying down credit cards or unsecured lines
of credit gives you a tax - free,
risk - free return equivalent to the debt's
interest rate, which could be as high as 28 %.
Each account is diversified across a variety
of sectors and maturities to help ensure it is not concentrated in any one area, can better handle changes in
interest rates, and can potentially help reduce overall
risk to principal over the long -
term.
These are long -
term taxable bonds that pay the highest
interest rate of all the bonds, due to increased
risk of default.
While the portfolio
of high - quality bonds may offer additional return potential, long -
term investment grade bonds are subject to substantial
interest rate risk.
The
risk - free
rate is a theoretical
interest rate that would be paid by an investment with zero
risk, and long -
term yields on U.S. treasuries have traditionally been used as a proxy for the
risk - free
rate because
of the low default
risk.
Our research shows that it is not a single
risk - free
rate that drives asset pricing, but rather the entire
term structure
of interest rates (also referred to as the shape
of the yield curve; we use these
terms interchangeably).