Preferreds, including perpetuals, are down a little this morning–but we are talking nickels and dimes. With the 10 year treasury still up 9 basis points at 4.62% it could have been much worse–part of the damage has been mitigated by the S&P500 finding its low earlier at down 1%, but has now climbed its way back up to down just of by 1/4%.
Honestly this drop hasn’t brought any bargains at all.
I didn’t listen to Jay Powell either yesterday or today–didn’t even see any ‘clips’ of the testimony–I pretty much knew what he would say as did all of you– so I can do without the drama. Right now the FOMC is looking pretty smart with their call to pause rate cuts–but maybe they weren’t so good when they cut rates earlier–caving to politics I think.
We’ll see how this day ends–maybe a plunge—maybe not.
We are getting some reports from Ways and Means in terms of a budget proposal.
“The newly released House GOP resolution proposes a $4 trillion debt ceiling increase.”
“The proposal includes $4.5 trillion in tax cuts, $1.5 trillion in spending reductions, $300 billion for immigration and military efforts, and a debt limit increase. If approved, these measures would help Republicans push significant legislation through Congress along party lines.”
Will this be net positive for inflation and/or TBill rates? I will not venture a guess because when the tax cuts were 1st announced in 2017, I expected that long-term interest rates would increase. Neither inflation or long term interest rates were materially impacted. I am as bad as predicting this as I am at picking which college QBs will be long-term NFL starters.
The bond market, if it impacts rates, will begin to react as this proposal begins to advance.
https://www.newsweek.com/republicans-reveal-trump-tax-plan-will-cost-us-45-trillion-2030024
Potential end to Russia Ukraine conflict should help lower inflation/rates. A return to geopolitical stability is credit positive. I think that may have mitigated moves today. Personally, I have been gravitating toward higher quality fixed duration in case we do get a drop in rates (could also be due to shallow recession caused by less gov’t spending/jobs). And when I say gravitating I mean from nearly all floating rate to about 25% fixed.
Interesting Take Dan–I just saw a few minutes ago that Trump/Putin may meet soon. We’ll see where it goes.