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A Mixed Quarter for Interest Rates, but Credit Continues Its Rally

The third quarter in bond funds.

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All eyes were once again on the Federal Reserve in the third quarter. Although the Fed didn't hike, the broader rates environment was mixed. Perhaps the biggest story of the quarter was the continued rally in credit-sensitive bonds.

Rates, Rates, and More Rates
The Fed once again made news in July and September with its decision not to raise short-term policy rates. In her speech following the September decision, Fed Chair Janet Yellen noted that economic conditions had strengthened since the first half of the year, signaling an openness to a potential hike later in the year. There were other signs that a hike might be on the table in December, including dissents from three Federal Reserve regional bank heads. As of Wednesday, the Fed Funds futures markets were pricing in a bit more than a 50% chance of a rate increase by December.

Sarah Bush does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.