A Slow Motion Assault on 3%

Today we have had a ‘slow motion’ assault on the 3% mark on the 10 year treasury.  There doesn’t seem to be specific news to account for this move, but the key here is it is a very slow move–a snails pace almost.  We all know that ‘speed kills’–and it is very easy to miss the lower income security prices–1, 2 or 3 pennies being lost on the average day doesn’t garner headlines.  The AVERAGE price of the preferreds and baby bonds is moving slowly–very slowly, lower, but these moves tend to get obscured by payments of dividends etc. so you don’t notice these glacial paced moves lower.

While the Producer Price Index (PPI) came in a little lite of expectations today there is a continuing amount of chatter about inflationary pressures.  There is not too much doubt in my mind that there truly are pressures.  With crude oil trading around $70/barrel and the huge jumps in building material costs we have seen in Minnesota there simply has to be inflation at a higher rate than we have seen reported.  We see home builders in our area of rural Minnesota asking 10% more for new construction than they were just 6 months ago–they claim it is all about material costs.

Tomorrow we see the Consumer Price Index (CPI) being announced and this is the more important report.  While the PPI report is mostly ignored, the CPI doesn’t get ignored if it is off the consensus.  The year over year consensus is 2.5%-if we were to see a 3% print you can bet that interest rates would react strongly.

The bottom line is I still believe that 3.25% on the 10 year is the right number for the end of the year.  If we saw this rate on a straight line basis the rates would move higher by 4 basis points a month throughout the balance of the year.  We would be very happy with that result.

Knocking on 3%

All day long the 10 year treasury yield has been trading around 2.98% which is up 3 basis points from yesterdays close.  The only news of substance seems to be the JOLT (job openings and labor turnover) report from earlier today.  This report showed almost a 1/2 million more job openings than expected, which would imply more potential pressure on wages in the months ahead.

This little move higher in rates is sending REITs a bit lower.  REITs have been strong in the last couple of weeks with the entire sector up about 5%–so honestly it needs a bit of a breather.  Utilities have moved lower today by a full 2% as they continue just barely above their 52 week low.

No other income securities, preferred stocks or baby bonds, are moving beyond the normal +/- 1% (normal noise).

We do note that Trump just finished his “pull out” speech on the Iranian nuclear deal and there was little reaction excepting the oil market which headed higher on the potential that Iran will not be able to sell their oil.  This is silly–they will sell the oil and the long term affect on markets is very small.


Entergy Arkansas to Redeem All Old Perpetual Preferreds

It looks like Entergy Arkansas (a division of Entergy-ETR) is redeeming all of their old perpetual preferreds. These issues were originally sold back in the 1960’s and are all $100 issues.

These issues all have coupons between 4.32% and 4.72%. This seems a little unusual that they would redeem these low coupon issues, but they are small issues and likely the paperwork is more trouble than it is worth.

The company is selling 1st Mortgage Bonds ($1000 bonds) to do the redemption.

The prospectus showing the “use of proceeds” can be found here.

Specialty Insurer Atlas Financial Announces Decent Earnings

We only touch on the earnings just announced late today by Atlas Financial Holdings (NASDAQ:AFH), because the company had sold a 6.625% baby bond a year ago and then recently announced a surprise write down sending the baby bonds tumbling. We had bought the bonds in the Medium Duration Income Portfolio as well as in our personal accounts at $25.45. Shares had traded as high as $27 early in 2018. Today, just prior to the earnings announcement the baby bonds ended the day at $24.84.

Atlas is a small specialty insurer involved primarily with the taxi and limousine business. They had announced a huge write down based on old claims which had not been adequately reserved for–the write down was massive, but getting the news out and the write down behind them should allow a recovery in the baby bond price–over time.

AFH announced earnings of 45 cents/share which is pretty much on target and there were not any surprises in the earnings report. We have noted over the years that when a company announces a surprising financial event it takes at least a quarter and many times 2, before investors begin to regain some trust.

With these earnings we feel some comfort and relief that the company appears to be on the road to recovery–but 1 more quarter is required for us feel totally comfortable.

Monday Morning Kickoff

Is it Monday already?  We have reached the time of year when the weekends go too fast and Monday arrives way too soon, but alas it is Monday.

Last week the 10 year treasury opened the week in the 2.95% area and  bounced up and down 4 basis points from there through the week, before closing at 2.94%.  Out of all the economic items announced last week not a 1 of them was important enough to move the needle on interest rates.  Really the only 2 economic items anyone paid any attention to was the wage inflation component of the employment situation report, which was benign, and the announcement at the end of the FOMC meeting on Wednesday which also contained no real surprises.  The Fed announcement on Wednesday contained nothing to make anyone believe that the Fed Funds rate hikes wouldn’t continue and thus it is likely that we will see a 1/4 point hike in June.

For this week we have 5 speeches by Fed presidents–seems like these are always about the most important things that occur in a given week.  Markets listen way too closely to these folks–any given president has his/her opinion only–on its own it has almost no meaning (from our perspective).  We ignore them and investors would do well to do the same.  On Tuesday we have the Job Openings and Labor Turnover report (JOLTS) on Tuesday–no likely surprise or market reaction to this report.  Wednesday we have the Producer Price Index (PPI) being released and on Thursday the Consumer Price Index (CPI) being released.  The PPI is typically ignored but the CPI will have the power to move the markets. CPI is estimated at up 2.5% year over year, but at up 2.2% less food and energy.  With energy prices moving higher we could see a pop in the CPI (although not in the core rate which is less food and energy).  Of course rising energy prices takes a little money out of the consumers pocket which will not be able to be spent on durable goods down the road.  Beyond the above we will have some treasury auctions, as we do every week, but generally this week has minor treasury auction action.

Last week in spite of the lack of movement in interest rates we saw the average preferred and baby bond move lower by a 6 cents to $24.82.  We now have 210 $25 preferred stock issue trading under $25 which is 7 less than the week before, but still one of the highest levels of issues under $25 for the year.

The Fed balance sheet run off remained active with a runoff of $16 billion last week.  This is a large amount relative to most weeks and gives a two week total of $29 billion run off.  As we have written a million times we believe this runoff is what is keeping upward pressure on interest rates (along with huge treasury demand for new money).

The news we stumbled across this morning is that the treasury raised $488 billion in new money during the 1st quarter (January through April), but ended the quarter with larger than expected cash balances on hand because of higher receipts and lower outlays.  This means the needs for the 2nd quarter are just a measly $75 billion of new money.  This is good news for income investors as it will take a bit of pressure off of interest rates.  So we will have continued pressure on interest rates caused by the Fed runoff, but we will only have modest pressure caused by the needs of the Treasury.

A couple new issue baby bonds started trading at the end of last week.  The Sutherland Asset Management (NYSE:SLD) 6.50% baby bonds (NYSE:SLDD) started trading and closed the week at $25.13.  Also the 5.25% baby bonds (NYSE:HCXZ) of Hercules Capital (a BDC) started trading and are below $25 at $24.87.

Given that we have plenty of cash available in the Medium Duration portfolio we will add a 1/2 position (200 shares) to this portfolio today of the Sutherland Asset Management 6.50% baby bonds.  While we don’t view Sutherland as a great REIT we do think with a maturity date in 2021 and a 6.50% coupon it is reasonable to hold in this portfolio.




Mid Day Rambling

The employment report today proved to be a non event–as almost all reports of any type have been lately.  Given that the wage component of this report was relatively benign at a plus .2% the rest of the report is somewhat ignored.  If the wage component it was +.4% instead we would have had real fireworks in the interest rate complex as it would be like screaming ‘fire’ in a theater.

This leads to a bit of a quandry–we used to write about the ‘haves’ and ‘have nots’.   The ‘have nots’ are feeling pretty good about their situation (whatever it may be), but if we stay in this stagnant low wage growth environment we wonder how long they will stay feeling good.  We know that CEO’s are making out like bandits (in some cases they are really bandits–in my opinion)–but is the lower end really doing that well?  Consumer confidence numbers say folks are happy–but these reports show very low wage growth–somebody is telling a fib we think.

The 10 year treasury is pretty flat–up and down a basis point.  The stock market is in the normal start weak and come blowing back mode.  This is all about the traders who detect the trend.  When the DJIA starts off down 100 or 300 points the short term traders pile in driving it up 200 or 300 points.   If you are playing with a $10 million bankroll this has been providing some tidy returns.

I just looked over the baby bonds and preferreds and see everything is quiet.  Maybe the biggest item today is the 2 HSBC trust preferreds that were announced for call today.  Guess all of the holders at $26.15 took a tad bit of a spanking on that call–hopefully they knew the risk they were taking and didn’t just buy yesterday so they could get the high 7’s% yield–if it was a newbie holding the shares they learned a lesson–if it was Gridbird he had the risk factored in.

We have been waiting all week for a money transfer to make a new investment, but just checking the account it has still not arrived.  Never had a transfer from my checking account take this long (a week).  We will likely write about the new investment this weekend regardless of whether the money arrives.

Hopefully everyone will have a good weekend.  Spring finally arrived in Minnesota so I have laid down a nice nitrogen on our lawn–this sets us up to ride the tractor every 4-5 days.  Unlike some of our neighbors we love to mow with the tractor–we almost fight over who gets to mow.  Our lawn is almost an acre and an hour ride on the tractor really allows one to do some mindless labor and de-stress.



Not So Quiet After All

Well the day has been kind of exciting if you hold common stocks, although looking at the screen you wouldn’t know the DJIA was down 400 points earlier as it is even right now.

Looking at the 10 year treasury drift lower makes one think this would be a positive to income investors–but we think not.  While it is not a negative it doesn’t appear to be a positive either.  It is something we have noticed the last couple of months–that when interest rates spike higher preferreds and baby bonds fall a bit in price, BUT when rates drift back down prices of those some securities do not rise.  I think money is moving to alternative investments–i.e. short term bills such as a 6 month treasury.  They have a current yield of 2% so why would the ultra conservative investor put money in any longer dated bond.  Can you imagine investing in a 30 year treasury bond for 3.1% when you can get 2% of 6 month money?  I can’t.

In the “what the hell” department–I was just looking over a pricing supplement to a prospectus–NOW medium term is 30 years??  Guess the 3-7 years I like is Ultra Short Term.  I guess the 100 year bonds that the utilites have sold lately are ‘long term’.


4.05% Secured Medium-Term Notes, Series M, due May 1, 2048




Gladstone Investment — Update on Term Preferreds

We were alerted to a potential item with Gladstone Investment (NASDAQ:GAIN) term preferreds–there are 3 issues outstanding, by an astute reader–BlueJoseph.

GAIN (a BDC) has lowered the required asset coverage ratio from 200% to 150% for senior securities effective in about a year. BlueJoseph noted that the offering prospectus specifically noted a need to maintain a 200% asset coverage. We checked and he is correct.

Just to make sure we had the bases covered we checked with the company and the following is our question for them and their reply.

The following comment was submitted via the Gladstone Investment Corporation website.

Hello–I am wondering if the recent change in the asset coverage requirements in 2019 (from 200% to 150%) will be applied to the currently outstanding term preferred stock issues? The original offering prospectus specifically states 200% (versus a more generic wording such as “as required by law). Thanks for your help. Tim McPartland

Gladstone Investment Reply.

Good morning Tim
The change does not impact the currently outstanding term preferred stock.

As you can see GAIN IR notes that the issues are not affected. This likely means that all 3 outstanding term preferreds will have to be redeemed prior to maturity–UNLESS they maintain the 200% coverage ratio.  The 6.75% (GAINO) issue is now redeemable. The 6.50% issue (GAINN) becomes redeemable on 5/31/2018 and the 6.25% issue (GAINM) on 9/30/2018.

All 3 issues do not reach ultimate mandatory redemption until 2021-2023.

So what does this mean to us that hold plenty of these?  Not much as they are all trading just 2 monthly payments above liquidation preference ($25) so not much is at risk.  BUT new purchases of the securities should NOT be made at high prices – i.e. $25.88 – or just understand the yield to potential call might be very small or negative.

Looking for A Pretty Quiet Day

Stock futures are off a bit this morning and interest rates are a bit lower as well, but overall we think it will be kind of a quiet day as investors await the employment report tomorrow.

The Fed announcement yesterday, of course, was a non event. There is a little inflation, but to us folks that are a bit older getting excited about 2% inflation is kind of a joke. As we all likely believe the Fed will raise short rates at least once more this year (in June) and any further hikes will be “data dependent”. These higher rates on the short end have been positive to us conservative folks in that at least we get a little interest on excess cash holdings. I got a piece of mail from American Express yesterday trumpeting their ‘savings account’ paying 1.55%–that’s better than nothing–in fact after getting zero for years it is pretty good.

As we noted early this week we have a couple new buys we are looking to execute, but we are awaiting the clearance that our $$$ has arrived in our new account. We have had to transfer a small amount of money to a new account to buy a new investment. We like to “eat what we cook” on this site–so we want to make a real investment in a new item we found from a suggestion of one of our readers. More info to come soon (I hope).

I also want to do a bit of a deeper dive into Sutherland Asset Management (NYSE:SLD) who has issued a new baby bond. Also really want to get in deeper on Eagle Point Credit (NYSE:ECC) who has a couple baby bonds and term preferreds outstanding.

Watch the Fed Statement

The Fed will make a statement in an hour (after their monthly meeting) and you can be certain the press will parse the statement for every little crumb of news as to future rate hikes and potential inflation.

We have an interest in the statement, but obviously will not react in any way to it.  It may make a difference whether the 10 year treasury trading now at 2.98% spikes over 3% or whether it continues to drift-potentially low.


Model Portfolios Get In the Black

It has taken a few months to get the model portfolios into the black, but they have now gotten there–hopefully they will remain there for the balance of the year.  New portfolios always take some time to get in the black as we can’t book dividends for the 1st month or two because we do not time portfolio construction to capture dividends and many times we miss the ex-dividend date.

Recall that these portfolios are not meant to be traded–at least very often, and are meant to be ‘low stress’. For us feeling like we have to ‘babysit’ investments is something that causes me stress. We prefer to be lazy and invest and then kick back and monitor instead of babysitting.

These models are not meant to replicate how many of our readers invest as many readers ‘flip’ preferred shares for 25 or 50 cents as opportunities arise, but I am not able to do that now as it takes a bit of thought and research and we have our hands full right now.

The Enhanced High Yield Portfolio has been a bit of a disappointment (but now up 1/2% after 3 months), but we are patient and as long as we believe we are heading in the right direction we stick with investments.  Spark Energy 8.75% fixed to floating preferred (NASDAQ:SPKEP) has not acted like we thought it would act.  This issue was originally issued in March, 2017 and traded as high as $27.50/share in late 2017.  The company re-opened the issue in January, 2018 and this knocked the shares down to $23.  We had purchased too early at $24.54.  Fortunately shares have recovered to $23.83 now and we believe the recovery will continue–the company announces earnings on May 10th and we are hoping for a good report.  Whitestone REIT (NYSE:WSR) has performed poorly and reader beababbage had questioned that original purchase.  She was right to question that buy and we are looking to exit soon on a losing position.  The reason we will exit is because the company has hinted that a reduction in leverage would be desirable and this can only mean the issuance of more common shares and we don’t want to be around when that occurs.

In the end when you have a couple losers in a relatively concentrated portfolio it easily eats up a month or two of dividends.

The Medium Duration Portfolio is performing about as expected excepting for the 6.625% baby bonds from Atlas Financial (NASDAQ:AFHBL) which tumbled after the company booked a huge reserve for prior losses (they are a specialty insurance company).  The company lost some credibility in our eyes with this ‘surprise’ reserve announcement and on May 8th they will announce 1st quarter earnings and we expect NO surprises.  If there are surprises we may have to exit, because credibility is important to us.

Additionally the portfolio held Arbor Realty baby bonds (ABRN) which were called last week–this loss is painful as it is pretty tough  to replace a 7.375% coupon with a short/medium duration term preferred or baby bond.

This portfolio is up just over a 1/2% in almost 3 months.

As we have predicted in many of our writings it will be tough for income investors, who are ‘buy and hold’ investors to make much of a return this year.  Rising interest rates will pressure share prices so dividend/interest gains will likely be offset by some capital loss.  This is where the ability to do a little ‘flipping’ can be advantageous to the income investor–those gains of a few hundred here and a few hundred there can help juice the returns.


Mid Day Rambling

In what has been on ongoing trend interest rates have ticked a bit higher today to 2.97% on the 10 year treasury while the DJIA tumbles–this isn’t the norm (historically), but what is normal about these markets? They have been manipulated so long that what used to be up is down and what was down is up. Of course with the Fed balance sheet runoff and global central banks continuing to do a little QE why should anything be normal now.

1 new issue which began trading yesterday is the new 6.6875% baby bond from Eagle Point Credit Company (NYSE:ECC). This issue (NYSE:ECCX) doesn’t mature until 2028. Because of this particular maturity date it does have some level of interest rate risk in it and right now as can be seen it is trading kind of weak. The coupon coupled with the 2028 maturity date seems to push the limits of what kind of terms conservative investors like me are willing to accept in a rising rate environment. We have no interest now, but that doesn’t mean that we won’t have in the future.

A quick look across preferreds and baby bonds doesn’t show more than the normal + or – 1% moves.

We do have a new investment we will be making in by the end of the week, but we want to write a complete article on it–let’s say it is ‘innovative’.

Redeploying a Little Cash

As we have written about we personally held bunches of Arbor Realty 7.375% baby bonds (ABRN) which were redeemed in total last Friday.  The shares redeemed at $25 plus about 37 cents of accrued interest.

We also held 400 shares of them in the Medium Duration Portfolio.

Lacking better ideas we purchased an additional 200 shares of the Southerly Hotels 7.25% baby bonds (NASDAQ:SOHOK) which have a maturity date in 2021.  They also have a early call date starting in a year–thus we hope they are not early redeemed (although they would be redeemed at 101% plus accrued interest).  The shares went ex-dividend today.

This leaves the portfolio at 85% invested which is just fine at this moment. We await a bargain somewhere with the last 15%.

Checking Out Gladstone Investment (GAIN)

One of our readers had asked about what we thought about Gladstone Investment (NASDAQ:GAIN) so we thought we should do a quick run through of their recent financials since we own a substantial position in their term preferred shares.

Remember that given that we are interested primarily in their preferred stock we don’t feel a dramatic need to do a real deep dive on research of most issues. Certainly some like to do a deep dive in every case of investment, but for our needs and from experience we don’t need to do this deep of a dive on a Gladstone company.

Gladstone Investment is a business development company (BDC) and as a BDC they operate as a private equity fund looking to invest through debt or equity in market leaders in stable industries that are profitable with strong management.

The company has been around since 2005 and as such is becoming a fairly seasoned company, but as BDC’s go they are only a modest sized company with around $580 million in assets. As a BDC they are required to maintain an asset coverage ratio of 200% of their senior securities (debt and preferred stock). The company had $101 million of debt and $135 million in term preferred stock which means they easily are within requirements for a 200% coverage ratio. NOTE that the board of directors has voted to lower the asset coverage ratio to 150% effective in April, 2019 as allowed in recent legislation.  We disagree with this move, but all the BDC’s will go there so we may as well as get used to it.  We will simply have to keep our eyes on the financials in the future and certainly when the economy begins to soften at some point in the future.

Investors have to remember that assets of BDCs are valued by management as the investments are not in public companies–thus BDC investors have to “trust” management for the value of assets–of course we never fully trust the numbers, but David Gladstone, the chairman has been around quite a while and we tend to have a bit more trust in him.

The company has had increasing earnings and net asset value in recent quarters and they just announced an increase in the monthly distribution to common holders–from 6.5 cents/share to 6.7 cents/share. Additionally they declared a special dividend of 6 cents. The net investment income doesn’t quite cover the dividend, but the way they calculate the coverage is net investment income PLUS gains in net asset value. NAV gained 53 cents/share in the last reported quarter while net investment income was 23 cents/share for a total of 76 cents per share with dividends paid of 26 cents/share. The company paid two 6 cent special dividends last year.

As can be seen below the common shares have been strong and now carry a current yield of around 7.28%.

A quick review of the company financial statements show that GAIN is carrying little bad debt and we found no investment on non accrual.  The company targets to have 75% of their assets in debt with 25% in equity investments and all in all they have done an excellent job of managing assets.

From our quick review of the financials we think GAIN is in excellent financial condition and until such time as the economy softens it is likely their good performance will continue. It is noted that they will release 1st quarter results on 5/15/2018.

Of course we have no interest in owning GAIN as we don’t buy BDCs but we have a keen interest in the MONTHLY PAYING term preferreds.  Term preferreds, like debt, have a mandatory redemption date.

Term preferred GAINO had an early optional call date starting on 12/1/2017 and an ultimate mandatory redemption on 12/1/2021.  Shares carry a coupon of 6.75% and trade around $25.25 where we would expect they will continue to trade because of the potential of them being called at any time.

Term preferred GAINM carries a coupon of 6.25% and will have an optional redemption date starting 9/30/2018 with an ultimate mandatory redemption date of 9/30/2023. Shares are trading at $25.33 at this time which is where they will likely to continue to trade for now. With 5 years to mandatory redemption shares could trade below $25, but it is unlikely they will go massively below $25.

Term preferred GAINN has a coupon of 6.50% with an optional redemption period starting 5/31/2018 and a mandatory redemption date of 5/31/2022. Shares are trading at $25.36 and like the other 2 term preferreds is unlikely to trade higher because of the fear of redemption.

We find each of term preferred as buyable–at slightly lower prices–like 10 or 15 cents.. Whether GAIN is able to call these is kind of a close call. GAINO which is now callable has the 6.75% coupon and to make the early call worthwhile will require at least 1/4% and normally closer to 1/2% lower coupon and we are not certain they can achieve this level of coupon now–BUT investors need to realize that there is no clear and certain answer as to whether these can be redeemed. It is POSSIBLE that they would call them even if they had to issue 6.75% shares to do the redemption. While they would save nothing on the redemption the move would be a move to refinance at this level instead of waiting until 2021 and very possibly having to pay a much higher rate.

The GAINM and GAINN issues which become callable in later 2018 probably can’t be refinanced for a coupon saving–but again the longer term forecast will affect whether they are called or not.

Each of the term preferred will have 10 or 15 cents of call risk in them–but on a 1000 share purchase that is $100-$150—so it takes just 1 month of dividends to be at breakeven.  So does one buy the 6.75% issue, the 6.25% issue or the 6.50% issue?  Toss a coin and go with it.

As most readers know we like all term preferreds from the Gladstone Companies, which means Gladstone Investment, Gladstone Capital (both BDCs) and Gladstone Land (a REIT). We DON’T care for the Gladstone Commercial preferreds as they are perpetual preferreds and do not provide the level share price and monthly dividends that the term preferreds provide.

Monday Morning Kickoff

Ready to go for another week of excitement. Actually as we always write we can do without the excitement and have all stocks and bonds trade perfectly flat day after day.

The 10 year treasury opened last week around 2.97% and then spiked higher to 3.04% by Wednesday before closing the week back just below where the week opened at 2.96%. While closing the week at 2.96% the 10 year remains at the highest level in 3 1/2 years so now we will see if the rate goes above 3% and sticks.

The biggest item we have for the coming week economically is the FOMC meeting which starts Tuesday and ends Wednesday. No one is talking about any rate hike for May, but with a new Fed leader I don’t think one can count it out. A ‘surprise’ rate hike would be really disruptive to markets and honestly wouldn’t be warranted as the economy is fairly tepid, but the Fed is trying to ‘normalize’ interest rates and they might do something silly. We hope they wait until next month before moving again.

Today we have pending homes sales being announced as well as the Chicago purchasing managers index. Tuesday is the ISM Manufacturing index and the Purchasing Managers Index. Wednesday is the ADP Employment report–and while this could be meaningful, most will blow off any surprise number as it is not ‘official’ and wait for the ‘official’ number which comes on Friday. Thursday we have the Productivity and Costs index being released and this has some potential for moving interest rates as it has inflation components in the report–any inflationary indications will help to move the 10 year treasury above 3%. Lastly as mentioned above we have the Employment Situation report being released Friday and the expectations are for 190,000 new jobs with an unemployment rate of 4%. The expectations of wages is that they will remain flattish and any jump in the wage component of this report could also move the 10 year treasury.

The average $25 preferred and baby bond fell by 13 cents last week to end the week at $24.88 and there are now 217 preferred stocks trading under $25. This compares to $25.01 and 198 respectively last week–so pricing is getting more favorable for investors–slowly but surely. Investors sometimes think they are remaining flat in the shares, but over time–month by month they lose 1%—it is just a very slow drip lower. For buy and hold investors like us it is difficult to do much more than break even, but we see no reason to change our ways–it is for us the most comfortable way to invest and we will be happy with modest gains on the year.

We do note that the Fed ‘runoff’ started back on track last week with a $13 billion runoff–

Of course even at this rate it will take longer than most of us have on earth to run off the balance–but the point is that it is moving slowly in the right direction. This runoff when combined with new money being raised by the treasury will keep rates moving higher–regardless of economic vitality.