Quick Note About Interest Rates.

“On Thursday, investment-grade-rated Walt Disney Co. locked in the lowest long-term borrowing costs of any U.S. company in history when it issued 10-year bonds with a 1.85% coupon and 30-year bonds with a 3% interest rate, according to LCD, a unit of S&P Global Market Intelligence.” This news is from the WSJ on this Monday morning, July 11, 2016. What does it mean? It means that bond investors are willing to loan money to Disney for a period of 10 or 30 years and in return get interest of just 1.85% per year and 3% respectively. In other words, these investors are convinced that higher interest rates on bonds of comparable quality are unlikely for the next 10 and 30 years. Likewise, these investors do not expect substantial increases in the rate of inflation anytime soon because substantial increases in the rate of inflation would likely result in higher interest rates, which would reduce the value of their Disney bonds. As the quote suggests, things are different now.

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