Fed Low-Interest Rate Policy is Forcing Investors To Take Dangerous Investment Risks in Desperate Search For Better Yield
Fed Low-Interest Rate Policy is Forcing Investors To Take Dangerous Investment Risks in Desperate Search For Better Yield. The 30-year chart below shows US corporate bonds moving into negative yields. That’s the result of the Fed policy to keep interest rates low to stimulate the economy. However, those negative rates also are causing many individuals and institutional investors, including insurance companies and pension funds, to take enormous risks for higher yields. For instance, to make up for actuarial deficiencies for underfunded pension funds. The shifting money away from the corporate bond market into areas like the overbought stock market and many real estate classes is pushing up asset values beyond reasons. And, that raises questions about whether the low-interest rate policy will ultimately do more harm than good when these investments come tumbling down.