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Finance Dictionary and Glossary of Investment Terms
Interest-sensitive stock
Definition 1.
Stocks whose earnings are dependent upon and change with the interest rate, e.g., bank stocks.
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Definition 2.
A stock whose price is very much affected by rising or falling interest rates. Companies in a number of industries have fortunes tied to rates. Auto makers, home builders, mortgage lenders, financial institutions and others find that when rates soar, their business dries up. But some stocks can show rate sensitivity even in an industry not known for such problems. These are stocks that pay hefty dividends. Such stocks often are purchased specifically for their dividend. When rates fall, this dividend looks even better. But rates rise, this dividend is less appealing compared to Treasury securities and other riskless investments.
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