Who does quantitative easing protect or help? It's clear that interest rates have broadly fallen, but who is getting the better deal? Let's break it down by group.
Personal
For personal loans, I decided to focus on credit cards and personal loans. These rates have come down 20% at most from their highest levels. (I'm counting 20% in terms of the nominal move, not basis points). Both credit card and consumer loan interest rates (on average), remain above 10%. These are areas of credit that lower to middle income Americans access the most.
Corporations
A good indicator for corporate support from the Federal Reserve is to look at corporate bond yields. In an effort for the closet comparison, we've taken two bond indices with high rated corporate bonds (junk bonds are a market in and of themselves). The two highest rated bond funds had nominal drops similar to the 30 year fixed rate mortgage market.
Government
Finally, let's examine the government's price for borrowing. The best way to do this is to look at the 10 year Treasury rate, which represents the middle to long end of the Treasury curve. I like the 10 year duration, because I believe it represents a good average for duration of borrowing among individuals and corporations. So, are you surprised that the government's interest rate has fallen by more than 60% from its highs?
So, when we merge these six rates together, what does it look like?
It's hard with the above chart to make a distinction? The government is clearly getting the best interest rate deal, but isn't it borrowing the most money? (Or is that a separate discussion?) Unfortunately, I could not acquire any lending rates for small business, but one would deduce that it would be on the high range of this chart. So, who is the Federal Reserve really helping?
