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“Good News” Pushes Rates Up; We Speak Spanish, Korean and Mandarin

As a reminder, positive economic news pushes rates upward largely for two reasons: (1) money moves to stocks from bonds; and (2) good news gives the Fed reason to back off on its low-rate policy.

Stocks are the better investment vehicle to take advantage of positive economic news. So when good news surfaces, money shifts to stocks from bonds, creating less demand for bonds. When demand for bonds decreases, prices for bonds decrease too. This in turn increases yields or interest rates effectively.

Signals that the economy is improving imply that the Fed may be able to back off on its policy of keeping rates extra low to prop up the economy. Even though Fed actions (such as less bond buying, or actually raising the Fed Funds Rate) may be far in the future, just the threat of them on the horizon often pushes rates upward.

Another reminder: We speak fluent Spanish, Korean, and Mandarin.

Jay Voorhees
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646