Equities are quiet–interest rates are quiet–it looks like another day like yesterday as investors sit back and wait for decisions to be made tomorrow at the FOMC meeting. Of course consensus is for no change in the Fed Funds rate – the CME FedWatch tool which was 97% no change is now at 99%.
The 10 year treasury is at 4.32% this morning and I expect it will drift in a very tight range – I am still waiting to see if it will break above 4.36% – as always we need more data (I’m data dependent – mostly not going to make wild ass guesses).
Yesterday we did get a new baby bond issue from PennyMac (PMT) which priced at 8.50%–I like that coupon, but don’t like the company much. I am fairly certain this issue will work out in the end (a maturity of 2028), but I won’t be participating.
Yesterday I did nothing at all in my accounts – BUT I did buy my wife a 3 year NON CALL 5% CD. She is even more conservative than me and she funded her 2023 IRA yesterday and specifically wanted to lock in 5% or better for as long as possible and 5% was the best I could find that was NON CALL.
10 year ~ 4.363%….highest since 2007!
That’s the level I have been looking for—now we will see if the rate rejects that level or slices straight on up to 4.5%.
If oil pushes upward towards $100 or higher, that cost will infiltrate multiple sectors & pressure CPI & the FED. Time will tell…
Newbie, I am starting to see oil prices reflected in shipping rates. My flat rate for 500# or less has went from about $127.00 to $158.00 a 25% jump in the last few weeks. One customer today I quoted he told me he hadn’t expected it to be that high. Sales people sometimes estimate costs based off prior sales before they call to get a cost. Occasionally it’s a oops!
This holds for another month expect a Fed rate increase.
Charles M, I agree with you 100%. The FED may get stuck fighting rebound inflation if the Saudi-Russian coalition drives oil higher. Almost every sector is impacted by oil prices, either directly or indirectly. If the US gives the Saudis military defense guarantees, our government should negotiate reciprocal commodity guarantees IMHO.
Instead of a 5% 2 year CD, it may be worthwhile to buy a 5% 2 year U.S. Treasury Note. I bought more today. They are currently priced to pay 5.09% if held to maturity. Not only that but, unlike CDs, if and when the Fed starts to lower the 10 year bond rate, the price of the two year note can only go up. So it’s a win, win situation. Either I get 5.09% to maturity, or I make some income and capital gain and get out much earlier with a tidy profit.
Alan–I agree that is a possibility–BUT let’s not confuse the spouse with anything beyond a good old fashioned CD.
Treasuries over CD’s as they are state tax free in my state.
The new citi preferred can be bought now close to par. 7.625% not callable before 2028.
This is much higher than what’s generally available on comparable listed preferreds but I’m not really familiar with unlisted preferreds so not sure.
Any thoughts? are those much less liquid than listed ones? and why would citi pay up like this instead of listing it?
Underlying
C
Security Type
BOND
CUSIP
172967PE5
FIGI
BBG01JCXVB02
Description
C 7 5/8 PERP
Issue Date
SEP 21 ’23
Maturity Date
Perpetual
Next Option
NOV 15 ’28 CALL 100
I’m seeing most of the capital gains on my preferred purchases from last year disappear as the long term rates keep creeping higher and higher. Unless we get abrupt rate cuts in a crisis situation, these low yielding preferreds are not looking too hot.
I starting to think the yield curve will normalize, not by short term rate cuts, but by increasing rates on the long end. Too much government spending, too much borrowing.
Eladio;
I only have a few preferred/BB issues, mostly holding bonds and CD’s right now. Most issues have held close to $25.00 except UMH-D, it was $26.00 mid- summer last year, now $21.00. I bought it early this year at $22.00. It’s yield is only 6.375% so it is in the same boat with some of yours too.
Bill UMH D hits a7% yield I’ll probably pick up some although I don’t like they use it as an ATM