The Challenger Ltd (ASX: CGF) share price has crashed by 6.38% today after the market sell-off.
Challenger is Australia’s leading annuity provider for retirees looking for a secure source of income for their capital.
The nature of Challenger’s business means that it is very connected to any changes in the interest rate and the stock market.
US 10-year government Treasury bonds reached a four-year high of 2.86%, which beats the interest rate offered by most Australian bank accounts.
Challenger is affected by the interest rate change as it has ramifications for its fixed interest assets and liabilities on the current balance sheet as well as the future annuities that clients may or may not take up.
The demand for Challenger’s products is likely to keep rising as the years go by but it’s worth keeping an eye on Challenger to see what happens as interest rates rise.
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Motley Fool contributor Tristan Harrison owns shares of Challenger Limited. The Motley Fool Australia owns shares of and has recommended Challenger Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.