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Low Rates Could Outlast Bernanke

Markets see Fed holding benchmark rate close to zero even after Bernankes term ends in 2014.

By Steve Matthews and Aki Ito, Bloomberg | Updated on September 13, 2012

The end of Ben S. Bernanke’s term as Federal Reserve chairman in January 2014 hasn’t stopped investors from betting the central bank will hold the benchmark interest rate close to zero into the following year.

Bond-market measures from overnight index swaps indicate no increase in the federal funds rate until mid-2015, compared with the central bank’s current view that the rate will probably stay low at least through late 2014. The gap between two- and five-year Treasury yields, which shrinks when traders expect benchmark rates to remain subdued, is more than 50 percent narrower than its average since 2008.

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