Banks are soon releasing their first quarter earnings. There have been officials that have signaled they expect three rate cuts before the end of 2024, but some investors and economists think the Fed might not cut rates at all this year (Saeedy, 2024). After the Fed started raising interest rates to curb inflation, the value of those bonds fell, pushing up unrealized losses on securities in the banking system to $478 billion as of Dec. 31, according to data from the Federal Deposit Insurance Corp (Saeedy, 2024). Even though banks are likely to ultimately recoup most of the money they invested in these securities, in the meantime it is tied up at lower rates.

Federal Reserve Chair Jerome Powell has said there will be more bank failures, after a trio of lenders collapsed last year, because of the correction in office and other property values. Commercial real estate banks hold around 50% of all the debt backing office, retail, and other nonresidential properties in the U.S(Saeedy, 2024).

Strong economic growth and low inflation tend to result in higher interest rates, which can negatively impact bond prices. Conversely, economic uncertainty or recession may lead to lower interest rates, benefiting bond prices. The creditworthiness of the issuer can affect bond values. If the issuer's credit rating improves or deteriorates, it can impact the perceived risk and consequently the bond's price.

Diversifying your bond portfolio across different issuers, maturities, and bond types (government, corporate, municipal). Diversification can help mitigate the impact of interest rate changes on your overall portfolio. Construct a bond ladder by purchasing bonds with staggered maturities. This strategy ensures that a portion of your portfolio matures regularly, allowing you to reinvest in higher-yielding bonds if interest rates rise.

Saeedy,A. (2024).Banks start reporting earnings. This week. Here's what to expect. The Wall Street Journal. https://www.wsj.com/finance/banking/bank-earnings-stocks-jpmorgan-goldman-citigroup-ed8936bd?page=1

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