Interest Rates Stabilize

As we had written about on (expecting interest rate stabilization)  Tuesday interest rates (10 year treasury) have stabilized and for the moment markets are settling down.

The 10 year treasury hit 2.60% on Wednesday and REITs and many baby bonds and preferred shares took 1-5% hits as some weak hands sold the spike.  It is our belief that anyone selling preferred stocks and baby bonds made a mistake.  By selling one puts themselves in a position to be uninvested and there are few good alternatives available–sellers like these “buy high and sell low”–the opposite of what this investing game is all about.

On the other hand let’s face it that the marketplace has “hated” REITS and shares are trading right at 52 week lows.  While there are no fundamental issues with REITs investors have to understand that if the marketplace decides they dislike an investment class there is little any of us can do to change it.  If you are a holder assuming the fundamentals are solid I guess it is probably best to hold on.

Interest rates were as high as 2.57% today before finally closing at 2.54% and for the moment we wouldn’t expect rates to move dramatically higher.  Sure they might head back up to 2.60%, but investors should be expecting that by now and there should be fewer “knee jerk” reactions to moves to this level.  If rates were to head up above 2.60% we could have a bit more “blood”.