With a fixed annuity, your investment earns interest at a rate set by the insurance company, a rate that can change periodically in
line with market interest rates.
Higher yields on longer - term securities are a result of maturity risk premium because changes in the value of longer - term securities are more
unpredictable with market interest rates potentially more unsettled over a longer time horizon.
Higher yields on longer - term securities are a result of maturity risk premium because changes in the value of longer - term securities are more unpredictable
with market interest rates potentially more unsettled over a longer time horizon.
The timing and pace of those adjustments, if and when they come, will be a matter of careful consideration, taking into account all the relevant factors, including what might be
happening with market interest rates.
In general, bond prices are inversely
correlated with market interest rates — so if I'm holding a bond portfolio and market interest rates go up, then my portfolio will decrease in value assuming all else is held equal.
It is said that when interest rates fall, the common method of discounting future expected cash
flows with market interest rates means that the stock market should rise, since future earnings should be valued more highly.
For example, if a bond has a 7 % coupon at a time when the prevailing interest rate is 5 %, investors «bid up» the price of the bond until its yield to maturity is in line
with the market interest rate of 5 %.
This is very interesting for my seller financing strategy I plan on deploying and could be of benefit to the OP (My strategy is to buy free and clear properties with 100 % seller financing with prepayment lockout for 15 - 20
years with a market interest rate).
With market interest rates in free fall, the Fed's 2 percent rate target was mere wishful thinking.