Bond Interest Rates Are Sky High -- Should You Abandon Stocks for Them Right Now?
The Federal Reserve (or Fed) is the country's central bank, ultimately responsible for maintaining the financial system's stability, implementing monetary policies, and regulating the financial industry. Part of accomplishing the first part is controlling inflation levels, which the Fed has focused on for the past two years.
One way to combat rising inflation is by raising interest rates. Ideally, higher interest rates make borrowing less attractive (because it's more expensive), which slows down the amount of money in circulation and brings down prices.
Rising interest rates have a two-fold effect. On one end, debts become more expensive. On the other end, checking and savings accounts, bonds, and other fixed-income investments offer higher yields. With short-term yields hovering well over 5%, many people are considering abandoning stocks and jumping ship.
Source Fool.com
