Now’s the Time to Watch Interest Rates

Now that it appears that a deal is in place in Washington, we need to turn our attention to one key metric that affects all financial markets. That metric is interest rates.

Interest rates are either going to be a headwind for the economy or a tailwind going forward, and watching the key indicators here that allow us to determine the prevailing winds is going to be the key to our investing success.

Right now, the yield on the 10-Year Treasury Note is about 2.69%. This metric is important, because it determines the cost of borrowing for mortgages, business loans and other borrowing.

As you can see by the chart here, the yield on the 10-Year note declined sharply from its September high of nearly 3%. The decision by the Federal Reserve to hold off on any tapering of its bond-buying program was a key factor in this decline. Of course, yields have crept higher in October as fears over the government shutdown and a failure to increase the debt ceiling caused traders to position themselves for a “risk-off” situation in bonds.

The bottom line here is that if you want to know whether interest rates are going to help, or hurt, the economy going forward, it is essential to watch the movement in the 10-Year Treasury note. Doing so regularly will give you a much better handle on the markets, and your money.