Short term rates demonstrate economic processes: interest rate increase on the one hand may reflect money (financial resources) demand increase, on the other hand slows down economic development and as a result stock market growth, later create the downside trend in stock market. Interest rate decrease may reflect money (financial resources) demand decrease and fasten economic development and as a result stock market growth. (more…)

Greetings, let’s talk about interaction between long term and short term interest rates. Bond yields depend on market participant predictions (but not the only!) of inflation. Therefore we can expect that basis interest rates, which react at inflation processes in economy, more influence short term rates and less long term. Factors which have an impact onto the yields were discussed in the article “yield curve”. (more…)