Credit-Card Interest Rates Soar to Record High, Bond Yields Drop to Record Low: What Gives? | Wolf Street

Credit-Card Interest Rates Soar to Record High, Bond Yields Drop to Record Low: What Gives? | Wolf Street

According to the Federal Reserve Board of Governors’ consumer credit data, the average interest rate on credit card accounts with balances on which interest is assessed – so not counting the theoretical interest rate on credit card accounts that don’t carry balances – was 16.9% at the end of 2019, after having reached 17.1% earlier in 2019, a record in the data series going back to 1994.

The chart below shows this disconnect between the average B-rated junk-bond yield (blue line, ICE BofAML US High Yield B Effective Yield) that plunged to record lows; and the surging average interest rate on credit cards (red line) that soared to record highs. They should move roughly in the same direction with some gap between them, but they’re moving in the opposite direction:

via Credit-Card Interest Rates Soar to Record High, Bond Yields Drop to Record Low: What Gives? | Wolf Street