Author: Tim McPartland

The 10 year treasury is up 2 basis points–but equities are barely moving. In 30 minutes we have the release of the FOMC meeting minutes from the January meeting. While we know in a general sense what might have been said at the meeting we will have more ‘hints’ at how members are looking at future rate cuts.

Right now the CME Fed Watch tool is only showing about a 6.5% chance of a rate cut in March—after showing a near certainty about a month ago. Also a May rate cut is predicted at just a 29% chance of a cut–June is 52%. So expectations have been severely tempered over the last month or so. Honestly equities have been very patient awaiting the news of a cut–I would have thought we would have seen a more severe sell-off

I expect equities to have a sharp reaction to the news in the 1st 2 or 3 minutes – where it ends up no one knows. We possibly will see a sharp move in interest rates – which way depends on what the minutes specifically say about cuts from individual members. As usual no one knows what will happen. We’ll all wait and see–I pray we don’t get a huge rate spike on the news–we could suffer some losses.

Yesterday we got almost no movement in interest rates and resultantly pretty much no movement in income issue prices. The 10 year treasury yield closed at about 4.275%–and only traded a couple basis points (+/-) from there.

The average $25/share preferred and baby bond moved 2 cents higher yesterday–if you promised me that share prices would always move just 2 cents I would be very happy indeed. Of course prices will move, but typically we need a reason to move.

Today we have Fed yakkers, but the potential market moving event will be the release of the FOMC meeting minutes from January at 1 p.m. (central). While there probably are no major surprises in store for us in the minutes one can’t predict these things–algos will move equity markets, but interest rates are unlikely to move much. We’ll see.

As one might expect CD rates remain in the 5-5.35% area–very tasty still. I am once again about out of cash having bought some preferreds and rolling over a portion of proceeds from CD maturities. If rates maintain these levels I will be rolling over some money from maturities over the next 60 days—I can’t resist 5.3-5.4% for a portion of my funds.

For those watching the nightly ‘Headlines of Interest‘ I publish late in the day Monday through Thursday you probably saw the nice earnings from SiriusPoint (SPNT) – they can be read here. I hold a position in their 8% Resettable Preferred (SPNT-B) – it is highly likely I will add to this position in the month ahead (when I have cash). This reinsurance company is very well run–giving me confidence to add a few more shares.

Well let’s get the day rolling–expecting kind of quiet markets until 1 p.m. and then a little movement as FOMC minutes are released.

Once again with interest rates back up a bit and no rate cut coming for now from the Federal Reserve CD (certificate of deposit) rates have moved up a bit to levels that are once again pretty attractive. Fidelity and eTrade (as well as others I am sure) are offering up to 5.4% for a 1 year CD—of course at these higher rates they are callable after 6 months. Just the same this rate is attractive to me. February, March and April brings huge CD maturities to our accounts and I have bought the Brighthouse 6.6% preferred (BHFAP) and the Spire 5.90% preferred (SR-A) with some of the proceeds, but will now go ahead and buy some 5.3-5.4% CDs today–I don’t see going ‘all in’ on preferreds and baby bonds with conservative rates like this being available.

This morning we have some important economic news being released – primarily the producer price index (PPI), but also building permits and housing starts. The PPI in particular could determine whether the 10 year treasury falls back into the 3.80% – 4.20% range or if we move into a higher range for the time being. We will see some of the numbers staring in 30 minutes (at 7:30 central).

Our accounts remain near, but just below, record highs as we have taken some hits on preferreds and baby bonds in the last couple weeks. On the other hand the CD maturities have kept balances relative high as most of the CDs we have owned pay interest at maturity so large lump sum interest payments have been nice (although personally I prefer monthly or quarterly payments–but not many of these are offered).

We are heading into a 3 day weekend–no market action on Monday for the Presidents day holiday so folks can kick back and relax.

Well we had quite a bit of economic news released this morning–and like it has been for months and months some news was better than expected while other pieces of news were softer than expected. Looks like markets are ‘satisfied’ with the 10 year treasury off 5 basis points to 4.20%–are we headed back to the 3.80-4.20% range?

Initial jobless claims were pretty much on target. The Empire State manufacturing survey was stronger than expected—while the important retail sales numbers were soft–all in all mixed. Tomorrow we have producer prices which have a shot at moving the markets.

Today I will be doing nothing in the markets–I am out step with my ‘routine’–I had to do a 60 mile drive on icy roads at 7 a.m. and deal with a very ‘difficult’ divorce situation (client) – it turned out pretty messy as these things do on occasion so I am best not making investment decisions today.