Back to Work After a Pause

We kind of ignored the markets for the last couple of days as we wanted to get past the distracting noise of the Fed Funds rate hike. Markets were well behaved, but no use taking a chance in case traders tried to make a big deal of the hike.

Of course with the 1/4% rate hike the DJIA gyrated around a bit–but nothing of true note.  The 10 year treasury traded up a few basis points to 2.93% before settling back to 2.91%.  Preferreds and baby bonds yawned and closed totally flat (on average).  For Thursday and Friday we shall see if the 10 year holds the 2.90% level after trading in the 2.80% to 2.90% range for the better part of the month.  Quite honestly the increasing 10 year yield has moved in almost a perfect manner–up a little – down a little – it is not the absolute level that scares investors, but instead is the speed at which it gets there.

We did watch about half of the Jay Powell news conference this afternoon and it was refreshing to see someone shoot straight and tell folks they should remain calm and that interest rate “dot plots” weren’t worth much (which we knew already).

We have been reviewing the shorter maturity baby bonds for our next purchase in the Moderate Duration Portfolio and we will be making a purchase Friday. We also will be adding an issue to the High Yield Portfolio, but we are dragging our feet on this one as we may have some interest in the new CAI International fixed-to-floating rate preferred announced today that has not yet been priced. The container and rail car leasing company has super net income–but the balance sheet is loaded with debt. We will write more when the pricing is announced.

6 thoughts on “Back to Work After a Pause”

  1. Tim, I will be interested in the yield of the CAI issue and your analysis of its risk to worth ratio…..The Fed is trying to get back to The Bankers back to the good old days “3-6-3” rule…Pay deposits at 3%, loan out at 6%, and be on the golf course by 3.
    Looks like I made a tactical mistake. It appears in my brokerage account Gabelli accepted my additional 200 share $50 par oversubscription request to go with my other 200 surrendered shares of GDL-B for GDL-C. I should have asked for more as I would have got it I bet. The funds are still impounded so no info on when anyone can trade these. Probably several weeks away and I suspect wont trade at par either.

    1. Hi Grid–thought the pricing would have happened by now, but I guess they are still negotiating.

      I like the company and their financials, but with all their debt they aren’t to be held in a recession.

      1. Tim there is no pricing based on my understanding. It was only issued to existing owners of GDL-B who wished to buy them and any over allotments. The ticker will be assigned later. My understanding is any shares that go into the market will be sellers who bought like I did. Just like CNIGO and CNIGP. So I suspect they wont unload except at prices above the $50 par price.

        1. Maybe I am wrong, but I have never heard of any underwriting to occur. They are not calling GDL-B, just redeeming ones that wanted to exchange out of GDL-C.

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