3 ms·
That conflates term and other risk premiums. Interest rates are composed of: - Risk Free Rate - Inflation - Default Risk Premium - Liquidity Premium
by baby-yoda 4y ago
That conflates term and other risk premiums. Interest rates are composed of:
- Risk Free Rate
- Inflation
- Default Risk Premium
- Liquidity Premium
- Maturity Premium
The RFR has of course increased substantially in the last year but the other 4 components can easily be assessed as "riskier" when comparing to a year ago. Shorter term rates will absolutely be affected by the same components to varying degrees.