Interest rates: the long decline.

• Author: Davidson, Paul
• Position: ALASKA TRENDS

Interest rates are set by financial markets and influenced by the sale of United States Treasury securities and vice versa. Treasury bonds do not pay interest, rather they sell at less than their face value and pay in full on their maturity date. Subtracting the difference between the amount the Treasury bond is sold for and its face value gives the discount (interest) rate. U.S. Treasury bonds, due to their security, gauge interest rates by setting the interest rate floor of financial markets. The sale of U.S. Treasury securities and other federal open market practices are guided by the 12 members of the Federal Open Market Committee, which meets eight times a year in Washington, D.C. Treasury bonds are only, initially, sold at the New York Federal Reserve Bank.

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