What Rising Rates Mean for You
Whether you invest in bonds or not, rising yields will affect your finances.
For savers: Long-term bond yields won't affect money market mutual funds or savings accounts. But look for longer-term bank certificates of deposit to slowly raise their rates.
For homeowners: Yields on 10-year treasuries directly influence mortgage rates, and the national average on a 30-year, fixed-rate loan jumped last week to 6.84 percent, according to Bankrate.com. That's up about half a point since mid-May. But a fixed-rate loan probably still beats an adjustable-rate mortgage. A five-year ARM is charging almost as much: 6.67 percent. And many existing ARMs will soon reset at 7.25 percent.
For bond investors: Rising interest rates hurt bond prices. If you want the comfort of investing in Uncle Sam, stick with shorter-term treasuries. Investors in high-tax brackets should consider municipal bonds. Another option: floating-rate bank loan funds.
For stock investors: Stocks are still considered an attractive buy, especially shares of large, industry-leading companies. Small-cap issues will be hit harder by rising borrowing costs.
This story appears in the June 25, 2007 print edition of U.S. News & World Report.
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