I’m holding LIQUIDCASE and need to know if the returns on liquid funds enhance when rates of interest lower. In that case, what’s the underlying motive?
liquid funds spend money on short-term debt devices like t-bills, business papers and certificates of deposit. so when rates of interest lower the costs of those underlying bonds or debt devices usually enhance. thus this enhance boosts the general worth of the liquid fund thereby enhancing returns. one other rationalization is when rates of interest drop the yields on new debt securities additionally drop. nonetheless the liquid fund should still maintain older bonds with larger yields which improves the funds common return within the quick time period. additionally as bond costs rise when rates of interest lower the fund advantages from mark-to-market beneficial properties the place the present market worth of the securities held will increase.
