Search

The article discusses corporate debt markets, the issuance of corporate bonds in the U.S., and an analysis of the impact of the 2012 American presidential election on interest rates. It states that several companies such as the retailer Costco Wholesale Corp. have issued billions of dollars in debt as a means of paying out large dividends. An examination of the U.S. Federal Reserve Board's policy on interest rates is also provided.

The article focuses on the likelihood the U.S. Federal Reserve (Fed) will increase interest rates (IR) in 2016. It states in December 2015 the Fed increased IR from between 0.25 percent (%) and 0.5%, the first increase since 2008. It mentions that concerns over economic growth in China, stock market losses, and spreads on corporate bonds caused the Fed to hold off on an expected rate increase in January and March of 2015. It suggests the economy is doing well enough to result in a rate increase.

The author reflects on the emergency rate cut announced by the U.S. Federal Reserve before the scheduled policy meeting on January 29 and 30, 2008. He believes that several financial collapses may result if specialized companies that insure corporate bonds were to be in default. He asserts that a second rate cut is likely, unless there is immediate improvement in the economy. He argues that a second rate cut would amplify the extraordinary concern of the Federal Reserve over financial markets.