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Debt Deal? What Debt Deal!

Equity markets are trading in a tight range today–debt deal or no debt deal is the question. Certainly all sides will have a lot of yakking to do relative to the supposed ‘deal’.

It is surprising to see the 10 year treasury yield dropping by 12 basis points–my understanding–listening to the ‘smart folks’ is that Treasury will be selling near a trillion dollars worth of debt as soon as the debt ceiling is raised–have to rebuild the coffers I guess. It would seem that this would put more than just a little pressure on rates–but we will see.

What are folks doing? Anything at all–or just watching like me. I am ready to do some buying but today is a busy day for me and I haven’t really had time to peruse the ‘bargains’ out there. It is now almost 3 months since the banking crisis and while there will be some land mines out there I think doing some more nibbling is in order.

My basic outline is to let the CDs and treasuries run off and with luck do some buying on preferreds and baby bonds. I am back to wanting to lock in current yields in the 7-7.50% area on average. I am guessing that I am in the 6%-6.25% area now because of a heavier than normal allocation to CDs, treasuries and money market funds–but my sights are on many issues in the 7.5% to 10% current yield area–I will get into the target area fairly quickly when I think the time is right.

Last week when the website was ‘broke’ I added just a nibble on the Bridgewater Bancorp 5.875% perpetual (BWBBP) at around $15–CY around 9.5%. Very small bank ($4 billion). Many of these small banking issues are very, very illiquid. This issue has traded just 49 shares today – no wonder they move fairly violently when someone tosses out a market sell.

4 thoughts on “Debt Deal? What Debt Deal!”

    1. At least the Senate will vote on it tonight. Reject all 11 amendments and send it to Biden tomorrow. I have to say Lindsey Graham was at least more clever. He has gotten them to agree to introduce a supplemental bill increasing defensive spending in the future. There is, of course, a chance that the rest of the Senate or the House or Representative will not approve that supplemental defense spending.

      Nice to get all this BS on the debt ceiling out of the way.

  1. Tim,

    My guess on the treasury prices is that the market is always forward looking. It already tanked treasury prices expecting a crisis. And now that a debt deal is done, selling a massive amount of treasuries is already been priced in last week. Market will be moving forward past it. The most probably paths I’ve seen according to my criteria is that the worst of the pullback has already been done. If I’m wrong, any short term decline in positions is made up on long term opportunity on yields.

    This type of price action in the short term is always what gets a lot of pure fundamentals traders in a bind.

    1. legend.vs–your thinking mirrors mine to a large degree. Unfortunately the deal isn’t done until the deal is done.

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