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CIP Quips

Interest Rate Hike on the Horizon?

What’s in the News:

On Friday, August 26th, Federal Reserve Chairwoman, Janet Yellen, signaled the possibility of an interest rate hike in the near future:

 “I believe the case for an increase in the federal funds rate has strengthened in recent months. Of course, our decisions always depend on the degree to which incoming data continues to confirm the Committee's outlook.” [1]

As the Fed Governors analyze and debate whether the incoming economic data is strong enough to change monetary policy, as the chart below shows, the market is betting on a 70% chance of a 25-50bps increase or a 30% chance of a 50-75bps increase at the next Fed meeting in September.  The probability of an increase by the end of the year is at 43%.  Is this finally the good news that income investors have been waiting for?

Source: CME Group, as of August 29, 2016


What are we thinking?

Interest rate hike or not, our Current Income Portfolio is structured to potentially benefit in a rising rate environment, while also providing income investors with high income in a low rate environment, such as we have seen these past few years. While we wait for interest rates to rise, our intermediate term, investment grade portfolio can help your clients generate income.


[1] Board of Governors of the Federal Reserve System, visited on 8/29/16



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