Cross Currents Everywhere in Interest Rates

We are slightly surprised by the direction of the 10 year treasury in the last 2 days–now at 2.97%–we thought the days of sub 3% rates were behind us.  Just goes to show that trying to forecast day to day movements is near impossible.

So the Fed now believes it is ok to potentially let inflation run a bit ‘hot’.  This assumes of course that the Fed actually can control inflation–either higher or lower inflation.  With ZIRP (zero interest rate policy) for quite a number of years there was little to no inflation–so I don’t think that with the Fed funds at 1.50-1.75% and the 10 year around 3% we are likely to have inflation.  But as we have noted many times the yakking of the the Fed–either in speeches or in meetings, moves markets more than actual policy.

Heap on top of this the now terminated meeting with North Korea.  Of course who knows–the meeting might happen regardless of what is proclaimed today.

In the end the this makes no difference to us on a day to day basis.  The average preferred stock or baby bond moves only a couple of pennies in a day and tomorrow the story may change and we may have interest rates reverse higher.

Just a note for those that are bored from time to time with these markets.  There are 2 securities that we have been ‘position trading’ (multiple day holdings).  First is TBF which is the Proshares Short 20+ year treasury (rates go up and price goes up–rates down price down).  With interest rates down 4 basis points today it has moved 20 cents lower.  The shares have traded in a range of $23.17 to $23.70 in the last month.  We have traded the shares twice in the last month.  When we trade the shares we are looking for a 20/30 cent profit.  It thus far has been an easy trade and we are maybe going to ‘leg into’ shares today with more added if they get a bit cheaper.  A person needs to have conviction of where they think rates are heading longer term to make this trade.

The second is the conservative IHIT shares.  This is the Invesco Term Trust 2023 shares which we hold in accounts all over.  It is a 6% yield.  It has traded reliably between $9.70 and $10.03 this year.  We buy in the $9.70 to $9.80 area and sell in the upper end of the range.  Worst case we have to hold it for a while and with a 6% dividend we don’t mind.

NOTE-this is not a recommendation to try to do these trades.  These are just kind of for boredom–and flipping for a few hundreds in profits.  We do these within our IRAs.

4 thoughts on “Cross Currents Everywhere in Interest Rates”

  1. Hi Tim, really appreciate your site and all the great info. I was wondering what you thought about IHTA as comparted to IHIT? It’s selling at a bigger discount but 1 year longer term. thanks.

    1. HI MP–must have ESP. As I bought 800 IHIT at the close yesterday I ran across the IHTA issue. At first glance it looks good–slightly lower quality. It is trading 68 cents under NAV–what the hell is that about. Maybe it is one that would have a decent yield with a potential for a little capital gain–maybe it is better in some respects than IHIT.

      Going to do a bit more homework on it.

      1. Shew, looking at the YTD chart of these 2 (I own IHIT), IHIT has outperformed IHTA by a hair shy of 13% and has been much less volatile. ‘

        Jan1st to March 1st, it was down 10%. Odd…

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