Now consider this to be regarding angle of your own markets investor. Their investment costs flow for the give contour. Imagine if it had been 2% before the Fed undertaking elevating rates. The brand new bequeath anywhere between the cost of capital and you will yield try 10%, that has been the profit return.
Fast forward to now, and their cost has grown to become 5% (the original dos% in addition to 3 hundred bps path regarding the Provided), however, LC only has went the money in order to 14% (the first twelve% as well as the two hundred bps obtained increased their discounts).