Interest Rates Remain Elevated

Watching the 10 year treasury today I think it should be obvious to all observers that rates will remain above 2.80% for the foreseeable future. With the 10 year at 2.88% at this moment, after being as high as 2.89%, we think that rates will stay in a 2.80% to 3% range for the the next few weeks. The 10 year will only fall below 2.80% if there is another broad equity market selloff which sparks a flight to safety.

The jobless claims number this morning at 221,000 certainly helps to put a floor under interest rates and until we see some ‘softer’ economic numbers you should expect higher rates and thus lower prices on perpetual preferreds.

We will see how much runoff the FED allowed in the last week at 4 pm today as they release the balance sheet info. As we wrote early in the week we think this is a critical piece of data relative to putting a floor under interest rates–reduced demand at a time of larger supply.

Long dated perpetuals and bonds are off in price today which is expected, but key to us personally is that they move lower in an orderly fashion so as not to spook investors which would cause a panic rush out the doors.