On Sept. 18th, the Federal Reserve announced a cut in interest rates. What happened since then? Other than another rate cut in October — the interest rate on the 10-year US Treasury has gone up 44% since then.
Why are rates going up, if the Fed is lowering rates?
It’s because the market is a future pricing mechanism. If you look back far enough on the above chart, you will see that rates peaked in October, 2023. But it wasn’t until September, 2024 that we heard about “rates going down”.
The key takeaway? The rate cut in September (and October) was already “priced in”.
What this means for businesses…
Generally speaking, firms like Babylon ride the “interest rate wave”; except we see a 3-4 month lag. If you’re seeking capital, by default, you will ride that wave.
What do we mean by “wave”? Well, when rates started to decline in October, 2023, we started to see rates decline in Spring, 2024 — with a dramatic decline at the end of Q3.
That said, we haven’t seen rates in our business go up yet — given the “lag” — but we anticipate we’ll get dragged higher, before lower.