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CUs Could See Bright Side of Interest Rate Rise with Newly-Issued Bonds

MADISON, Wis. - Credit unions saw steep declines in emerging-market and U.S. technology shares last week even as profits climbed and economic expectations continue to be strong for the rest of 2004. This, according to the May 3 MEMBERS Capital Advisors' Marketline, which indicated that "most of the world's major...

By Staff Writer | Updated on May 18, 2004

MADISON, Wis. – Credit unions saw steep declines in emerging-market and U.S. technology shares last week even as profits climbed and economic expectations continue to be strong for the rest of 2004. This, according to the May 3 MEMBERS Capital Advisors’ Marketline, which indicated that “most of the world’s major stock indexes are now close to even or down for the year, even though we have just closed out a remarkably strong quarter of economic growth.” MEMBERS Capital said one possible reason for stocks being down last week is the “growing conviction among market participants that short-term interest rates will rise this summer or fall.” The current uncertainty surrounding the near-term behavior of inflation and interest rates, has suggested that investors should be prepared for volatility in financial markets, Marketline reported. “If interest rates do rise, then being a lender (or buying a bond) would be expected to be a slightly more attractive proposition each time rates go up. A rising interest-rate environment hurts the prices of existing bonds, but it makes newly issued bonds more competitive in respect to stocks,” according to Marketline. MEMBERS Capital is the registered investment advisory for CUNA Mutual Group.

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