Hi all,
I am trying to understand what happens if the US Fed raises interest rates and the knock-ons. If for example, they raised interest rates I have read that to service the nation's debt would increase by approximately 120 billion per 1% in rises. But why? Can someone please explain if America has bonds for a fixed period such as 2 year, 10 year etc, and the Fed raise rates why does the nation's borrowing rate also rise? I guess I'm trying to understand the mechanism.
Further, if this is indeed what happens in regard the borrowing costs and debt service rising so much, is it also true that if the Bank of England or ECB also raised rates does it do the same for them, or do they have different terms that apply?
Any help in understanding this would be appreciated.
I am trying to understand what happens if the US Fed raises interest rates and the knock-ons. If for example, they raised interest rates I have read that to service the nation's debt would increase by approximately 120 billion per 1% in rises. But why? Can someone please explain if America has bonds for a fixed period such as 2 year, 10 year etc, and the Fed raise rates why does the nation's borrowing rate also rise? I guess I'm trying to understand the mechanism.
Further, if this is indeed what happens in regard the borrowing costs and debt service rising so much, is it also true that if the Bank of England or ECB also raised rates does it do the same for them, or do they have different terms that apply?
Any help in understanding this would be appreciated.