Interest rates are pretty steady this morning–the 10 year treasury is hanging out around 4.31%. I suspect they will remain in a pretty tight range until Fed Chair Powell speaks tomorrow.
Of course I didn’t buy anything yesterday–and there is a lot of money now residing in money markets waiting for a more permanent home—certainly some heading back into CDs, but some into higher yielding preferred issues. I am finding myself being kind of lazy when it comes to reinvestment of maturing CD funds – it is so easy to just take a 3 month non callable CD at 5.35%.
So one question I find myself asking is what if we have seen the low in interest rates? I know that sounds silly, but what if we see a weaker economy in the next year and the Fed cuts rates so short term rates fall, but the 10 year remains elevated–it could happen. If the treasury continues to need to raise money in massive ways we all know there is trouble ahead–exactly when trouble arrives is anyone’s guess.
Equity markets are a bit soft right now so it looks like we will reverse yesterdays gains. The average $25 preferred and/or baby bond moved 3 cents higher yesterday–likely will see just a penny or two move today. Then we will see the ‘tone’ of Powell tomorrow and that will maybe move markets–although there shouldn’t be many (if any) surprises from the chair.