CHICAGO, United States — Traders monitor offers in the S&P options pit at the Cboe Global Markets exchange shortly after the Federal Reserve announced it was raising interest rates on September 26, 2018. The Fed agreed to increase the federal funds rate a quarter percentage point, to a range of 2% to 2.25%. (Photo: AFP)

Interest rates in the US are rising. However, chances are, the interest rate on your USD investment account has not increased. In fact, it may even have gone down.

Today we look at why higher interest rates in the US have not led to a broad increase in fixed income investment yields. This analysis applies primarily to yields on short-term money market accounts as well as medium-term fixed income investments such as bonds.

The robust economic growth in the US and the improving global economy, has resulted in a reduction in risk with a commensurate fall in yields on many new securities. In some parts of the market, a reduction in supply of new issues has also been blamed for the persistently low yields being observed.

This past week, the US Federal Reserve increased its benchmark interest rate for the third time this year and signalled its intention to hike once more in 2018 and three times in 2019.

What effect has rising short -term US interest rates had on the market?

Short-term US Treasury yields have risen significantly.

The yield on the two-year and five-year US Treasury securities have risen by roughly 92 bps and 73 bps respectively year to date.

http://www.jamaicaobserver.com/sunday-finance/why-the-fed-rate-hikes-haven-t-increased-your-return-yet_145552