The Tumbling Down of Rates Across the Globe
Even months after the repeated unfolding of events that have led to the continuing global crisis, the economies worldwide are still reeling from its disastrous effects. The downfall of some of the icons in the financial industry – Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers, Washington Mutual, Merill Lynch, AIG, Wachovia, to name a few – followed by the similar fate of the automobile giants all served to transform the once thriving business landscape of the country into a sullen territory of besieged by unemployment, home foreclosures, and an ominous recession.
These days, central banks from country to country have been slashing their Treasury rates in their attempts to revive their respective economies. Benchmark Interest Rate The benchmark interest rate, also referred to as the “base interest rate,” is the minimum interest rate that investors are willing to accept for investing their money in instruments that are relatively riskier than the government-issued Treasury securities.
(Farlex website) It is the “yield that is being earned on the most recent on-the-run Treasury security of similar maturity plus a premium. ” (InvestorWords. com) Needless to say, the benchmark interest rate fluctuates in unison with the Treasury yield.
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An increase or decrease in the prevailing Treasury yield will prompt a mirrored reaction from the benchmark interest rates. The benchmark interest rate varies from one country to another. These interest rates are actually indicative of the investment and economic climate that is currently in place.