When Playing It Safe Isn't Safe: Managing Reinvestment Rate Risk

2025-09-17 04:32:00 ET

With the next meeting of US Federal Reserve officials this Wednesday, it seems all but certain that monetary policy is set to become less restrictive as the Federal Open Market Committee (FOMC) responds to a weaker labor market. As short-term rates (i.e., savings account rates, money markets, certificates of deposits, shorter-dated bonds) are likely to decline, one of the most underappreciated and often misunderstood risks may begin to creep into the forefront: reinvestment rate risk....

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