Some time ago, the U.S. Federal Reserve began raising interest rates as a way to calm soaring inflation, though such a move also means that consumers are going to pay more on loans. As a result, purchasing a vehicle in that manner has gotten substantially more expensive, and it remains unclear if the Fed plans to continue raising rates over the coming months. Now, Ford Credit has purchased a considerable chunk of corporate bonds amid what are some of the highest yields in decades, according to Market Watch, a move that comes shortly after FoMoCo’s financing arm announced some executive shakeups and saw its credit rating rise to investment grade status.
Ford Credit was one of around a dozen companies – including Toyota, Duke Energy Corp., and Deere & Co. – that kicked off the new year by raising a collective $26.5 billion via corporate bond purchases, according to Informa Global Markets. Such a move is par for the course, as many companies do precisely this at the start of every new year, but 2024 looks a bit different thus far given extremely favorable yields.
It is worth pointing out that these same rates peaked back in October, and just last month, the Fed signaled that it may be done raising them altogether, and in fact, rate cuts may be on the table for the near future. According to some analysts, this may have motivated some to take advantage of higher rates before that happens, which could pay off in a big way even if the Fed does in fact decide to trim back interest rates this year.
“The one mistake I would say people are probably making is the continued bet on either T-bills, CDs or bank deposits,” said Phillip Toews, chief executive officer and co-portfolio manager at Toews Asset Management. “People need to be more optimistic about the opportunities in bonds and not be married to money markets right now.”