Magazine article American Banker

Some See Latest Rate Hike as Catalyst for Fund Sales

Magazine article American Banker

Some See Latest Rate Hike as Catalyst for Fund Sales

Article excerpt

The latest rise in interest rates may finally calm the financial markets enough to spur lagging mutual funds sales, some bank executives said.

In a round of interviews last week, some executives at bank brokerage affiliates said they were confident that the Federal Reserve had made its last interest rate hike and that stability would return to the stock and bond markets. This would make investments such as mutual funds and variable annuities more attractive to consumers.

Ron Szejner, president the broker-dealer subsidiary of First Michigan Bank Corp., Holland, Mich., said bankers and brokers across the country expressed "a collective sigh of relief" over the Fed's latest move. "Some people really believe rates have hit their peak, and they're starting to think about longer-term investments," said Mr. Szejner.

Until now, customers at First Michigan's brokerage have been snapping up short-term securities, such as treasuries, and municipal and corporate bonds because of their relatively attractive yields. But Mr. Szejner said he expects consumers now to start turning to longer-term securities to lock in rates.

He also said he expects investors to start putting more money into long-term mutual funds, especially bond funds which would benefit if interest rates remain stable or drop.

The current popularity of fixed-rate securities is no surprise, said Lynne Goldman, a consultant with Cerulli Associates, Boston.

"Right now what you're seeing is [interest] rates at some of the highest rates you have seen in years and if you think that rates are going to drop then you'd want to lock in rates now," she said. …

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