MONDAY APRIL 5, 2010

Why are intrest rates rising?

The 10 year Treasury note traded at a yield of 4% today for the first time since last June.  Rates have been slowly creeping higher in the last few weeks.  Investors are asking why.  Is because the economy is showing signs of s sustainable recovery?  Is it bond investors fears of the massive supply of bonds coming down the road.  With oil prices pushing $90 and commodity prices on the run again, are the much discussed but yet to appear inflationary pressures finally here?

My answer is all of the above.  No matter which reason one buys into, interest rates look to be headed higher.  The only debate now centers on how fast and how much.  The stock market should be able to weather higher interest rates as long as the increases are slow and steady.  Earnings growth is still very good.  However, if rates start to rise in a rapid fashion, the impact of higher rates and commodity prices may kill the nascent economic recovery.

POSTED AT 1899-12-30 14:50:00.0

KEN ENTENMANN, CFA
SENIOR VICE PRESIDENT AND
THE DIRECTOR OF INVESTMENT MANAGEMENT SERVICES

Ken is a Senior Vice President and the Director of the Trust and Investment Services at Alliance Bank, N.A. He has 23 years of investment experience and oversees the management of assets totaling $1 billion. He holds a B.S. in Applied Economics and Business Management from Cornell University and an M.B.A. from the William E. Simon Graduate School of Business Administration at the University of Rochester. He has also earned his Chartered Financial Analyst designation. He is a member of the Executive Committee of the Trust Division of the New York Banker's Association. He is also a director of the Central New York Community Foundation.

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