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A Little Red Today As Interest Rates Shoot Higher

The 10 year treasury is up 11 basis points at this moment at 4.11%—too fast of a move, although income issues are not getting hit too bad thus far–I’m surprised.

Equities which were modestly strong last night and into early today (futures market) moved lower all morning and now are staging a bit of a bounce–still off about 1%.

The building permit numbers this morning were fairly strong at 1.56 million units versus 1.54 million expected while housing starts were soft with 1.44 million starts versus 1.47 million expected. All in all not ‘hot’ but certainly not very ‘soft’. 30 year fixed rate mortgage are at 7.04% today per Bankrate–down 2 basis points from last week–likely will see these tic higher tomorrow.

I nibbled a few more shares of Liberty Broadband 7% preferred this morning–about enough of that one so will be looking elsewhere for more nibbling in the weeks ahead. I think I will likely go back to the banking sector–i.e. CUBI issues.

Tomorrow we have the Philly Fed manufacturing number, existing home sales and the Leading Economic Indicator for September. Any chance of softness? I doubt it.

13 thoughts on “A Little Red Today As Interest Rates Shoot Higher”

  1. Tim, instead of nibbling by the day, why not put in some bids on stocks you want to own at a certain price?
    Look at the cards in your hand and the ones you want and based on the percentage of the kitty you want to put into play start setting up open orders now. Set up everything as it’s only 2 weeks until the meeting of the Feds. Then just sit back and watch. As the time goes by you can adjust your asking price and number of shares.
    Ones I want to own I have looked at the lows for the last year, 5year and 15 years and estimated what I think might be a good low number and already placed orders.
    There’s a slight chance this next meeting may have a surprise for the basis points the Fed sets. Everyone is already betting they are going to raise and expect it to be 75 points. As you pointed out reports coming out this past month aren’t showing a big slowdown in the economy so don’t be surprised if we see 100 basis points increase.

    1. Charles, while that sounds good in theory, there are reasons why nibbling by the day also makes sense

      Now don’t get me wrong – I have some stink bids in on some stocks. But every open order reduces your purchasing power so you have to limit them.

      So I also just use price trigger alerts to alert me when a stock falls below or rises above a certain amount

      But more importantly, on nibbling, you don’t always know when opportunities you had not previously thought of present themselves. For example, I have owned GOODN for some time and had no intention of buying more. But the last 2 days there was a bug seller out on its sister issue GOODO. The price disparity and resulting yield was too good to pass up. So I bought some GOODO yesterday, selling off some GOODN to pay for it. I had a suspicion the seller wasn’t done and I thought we may get another big end of day dump today and we did which I was able to take advantage of (again selling most of my remaining GOODN to take advantage)

      My point is in this current preferred market it pays to be opportunistic as we can find some pricing disparities or price dumps and wide spreads that may not have been on your radar previously but make sense to nibble on when they occur

      1. Mav,
        I see your point, but sometimes things happen too fast to catch the opportunity.
        Today I just happen to be home sick with the flu and not at work. Makes it more difficult to actively monitor the market and individual stocks when you have something else to do.
        A couple open orders I had hit today. I have been buying SCE-PL and today I was trying to get a second tranche to get a full position in my portfolio. Now I am thinking I might try again and get a over allotment so I can sell the higher cost block I bought a couple weeks ago.
        A month ago I was thinking I would be happy with a 6% dividend. Then I realized what Tim was saying about getting a 7% yield on IG stocks is possible.
        The SCEpL hit 7% return today and Quantum on line shows a Ba1/BB+ rating.

        1. Also I want to give credit to Grid on a stock he suggested to me years ago. I had owned it once before right at the Covid panic. Then when it recovered I sold it. I regretted selling it but I was still trying to grow my portfolio.
          I placed an open order about the price I remembered buying it the last time.
          Today there must of been someone that placed a market order and my low ball bid hit. Another 7% er and S &P Ba1 rated

    1. CUBI – Customers Bancorp, Inc.
      You can then use CUBI to look up their possibly existing baby bonds, preferred, bonds, etc…

    2. They have preferred stocks that just went float pushing the rate over 8% though they are callable at next pay date. Popular choice here when the rate was still listed as lower.

      1. It and its E sister (before I fully rotated to F) have been one of my most consistent and price anchored issues I own. Its presently about my biggest hold. I am thankful most of my preferred money has been in live floaters such as these, because they have held up strong. Any time I toe into a fixed perpetual, I see a few greenbacks of capital melt away, lol. This for me anyways has reinforced why I have been lightly toeing in.
        Always seems like a better deal the next day. Though fortunately I have been on the barely green side each day this week. Beats the hell out of last week.
        If nothing else in a few months, I am going to get some big divi raises heading my way.

        1. I too bought some pinned to par issues. Most of them dropped below par. The pins failed. I’ll have to be content with the high yield.

          1. Yes, unfortunately the market has determined “pinned to par” is out of style. I basically ran out of them or refused to stay in them like the STAR preferreds.
            Live floaters have shown an interest in holding their ground thankfully. On second thought I still have, I hope anyways, 2 pinned to par issues…RCA and RZA.

    3. Bill,
      I believe ir refers to the customers Bancorp issues, like CUBI-f or cubb, which I also have been buying in the last days.

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