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What happens if the Federal funds rate starts to increase immediately?

April 26, 2017Federal funds happens immediately increase rate Starts

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What happens if the Federal funds rate starts to increase immediately?

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In this scenario, our calculations assume 25 basis point monthly increases in the Federal funds rate as well as continued constant correlation of the two-year Treasury yield. Based on the hypothetical assumptions previously mentioned, a short position in the two-year Treasury is able to perform positively.