Effects of Interest Rates on Municipal Securities
The Federal Reserve recently announced that they would be cutting interest rates but what does that mean? When the Fed announces increases or decreases in interest rates, it drives the market demand for municipal securities issued by California school and community colleges such as general obligation bonds. The change in demand by investors leads to a different overall borrowing costs for municipal securities issued by California school and community college districts. Increased demand leads to lower interest rates and lower overall borrowing costs and decreased demand leads to higher interest rates and higher overall borrowing costs.
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