Interest Rate Risk Quotes

The problem with interest rates are that you are not modeling a single number, you are modeling a whole term structure, so it is a sort of different type of problem.

It's one of the fundamental principles of the stock market: When interest rates go up, stocks go down. And along with financial companies and cyclicals, technology companies - with their sky-high price-to-earnings multiples - should be among the biggest losers in an environment of rising rates.

We're guessing at our future opportunity cost. Warrenis guessing that he'll have the opportunity to put capital out at high rates of return, so he's not willing to put it out at less than 10% now. But if we knew interest rates would stay at 1%, we'd change. Our hurdles reflect our estimate of future opportunity costs.

Although the Fed has subjected banks’ portfolios to stress tests to measure the effect of rising interest rates and investment losses, the results might not have shown the whole picture: U.S. banks, particularly small and medium-sized ones, may not have enough capital to maintain solvency and liquidity should their risky loans and investments fail in large numbers. The same is true of the stress tests that the ECB has performed in Europe,

The investor should be aware that even though safety of its principal and interest may be unquestioned, a long term bond could vary widely in market price in response to changes in interest rates.

To investors, job creation is a second-order effect. Market participants care first about interest rates, exchange rates, bond prices and the one great factor that affects all three: the long-term solvency of a bond company called the U.S. government.

If there were not derivatives, there would be no bank loans at all today, because people want to get fixed-rate 30-year loans, but banks don't want to keep 30-year loans on their books.

No one will lend at a negative interest rate; potential creditors will simply choose to hold cash, which pays zero nominal interest.

To finance deficits, the government must sell bonds to investors, competing for capital that could otherwise be used to invest in stocks or corporate bonds. Government borrowings raise long-term interest rates, stifling economic growth.

Investment banks manage to go bankrupt through their investment-banking activities, commercial banks manage to go bankrupt through their commercial-banking activities.

With interest rates artificially low, consumers reduce savings in favor of consumption, and entrepreneurs increase their rates of investment spending.

If inflation-adjusted interest rates decline in a given country, its currency is likely to decline.

Typically in a panic, corporate bonds sell off as investors fear weaker growth, tighter financial conditions, or need liquidity.

The very nature of finance is that it cannot be profitable unless it is significantly leveraged... and as long as there is debt, there can be failure and contagion.

I had begun to worry about the housing market back in 2003, when lenders first resurrected interest-only mortgages, loosening their credit standards to generate a greater volume of loans. Throughout 2004, I had watched as these mortgages were offered to more and more subprime borrowers - those with the weakest credit.

Imperfect substitutability of assets implies that changes in the supplies of various assets available to private investors may affect the prices and yields of those assets.

Rising interest rates are considered bad for stocks because they raise the cost of doing business and depress corporate earnings and because higher yields make bonds relatively more attractive than stocks to investors.

At the heart of banking is a suicidal strategy. Banks take money from the public or each other on call, skim it for their own reward and then lock the rest up in volatile, insecure and illiquid loans that at times they cannot redeem without public aid.

If investors avoid the Treasury market, we could be unable to pay off maturing securities, which would mean an immediate default. Market participants generally agree that even a brief default would create potentially catastrophic risks to the financial system, like the meltdown of 2008.

I had a couple come in with a negative amortization mortgage on a house that costs way too much relative to their income. They're consuming real estate, not investing in it.

Fannie Mae has never publicly disclosed how much money it could lose if interest rates rose 1.5 percentage points in a very short period of time.

Like many other banks and finance companies, Green Tree used a process called securitization to resell its home loans to outside investors. Green Tree grouped thousands of these small loans into a pool worth hundreds of millions of dollars.

Efforts to promote financial stability through adjustments in interest rates would increase the volatility of inflation and employment. As a result, I believe a macro-prudential approach to supervision and regulation needs to play the primary role.

With interest rates rising, gold doesn't pay an interest rate, but every other currency - it becomes not only less important to hold gold as an alternative, but more expensive to hold it as an insurance policy and so that will be a burden on the price of gold.

History has not dealt kindly with the aftermath of protracted periods of low risk premiums.