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There is Over $7.5 Trillion In Debt That’s Highly Vulnerable To Rising Rates – Here’s What To Expect

April 25, 2018

There is Over $7.5 Trillion In Debt That’s Highly Vulnerable To Rising Rates – Here’s What To Expect

The 10-year interest rate hit the critical level of 3% this morning.

And this is the highest level it’s been since 2014 – four years ago. . .

A couple months back, I highlighted the correlation of the rise in the Fed Funds Rate (FFR) and the Interest Payments Due on the U.S. National Debt. And as President Trump and Congress are showing no signs of slowing down their borrowing – this debt service cost will only keep rising.

But the U.S. Treasury will get funded no matter what – foreigners will buy the debt, or the Fed will print dollars to do it. Either way, they will borrow – no matter the cost.

But individuals and companies that borrow aren’t as lucky. . .

They’re forced to pay the higher interest payments.

 

So, with interest rates moving up, it would be smart to see what businesses and sectors are most vulnerable to rising yields.

And for this, we need to look at the LIBOR rate. . .

LIBOR stands for London Interbank Offered Rate and is a benchmark rate that the world’s leading banks charge each other for short-term lending. It’s the first step when calculating interest rates on various kinds of loans – whether government bonds, corporate bonds, mortgages, or student debt.

You might have heard about LIBOR over the last few years. Many of the world’s leading financial institutions were caught manipulating the rate for years to profit and protect themselves.

Here’s an example: back in the 2007-08 financial meltdown, Barclays Bank manipulated the LIBOR downward. This lowering of rates in a time where rates were trending higher because of global bankruptcy risks gave off the impression that they were ‘less’ risky.

The LIBOR Scandal is known as one of the greatest financial crimes in history. And banks were hit with many billions in fines.

 

…click on the above link to read the rest of the article…

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