Flight to Safety Causes Interest Rate Tumble

If it not one thing it is another.

For years we were concerned with the financials of most of the Europeon Union countries and then we weren’t worried–forget that most debt issues of these countries has NOT been addressed.  Many of these countries are just larger versions of Greece.  They have more debt than they will ever pay.

So now the answer to traders and some investors is to sell various European bonds and “buy American”–reminds us of 5-10 years ago.

My suspicion is that the European central bank will ‘deal with’ the Italian problem–it won’t be a long term solution, but it will placate the global marketplaces for the time being.

Of course the 10 treasury has fallen further than it has at any time this year.  Currently off 12 basis points and trading around 2.82%.  We think that once it bases it will move up a bit from here–but the Italian worries could stick around a week or two.  Also with the employment report we have this week there might have market moving consequences.

Today almost all income securities are up a tiny amount–the 400 point fall in the DJIA has not affected us thus far.

Income investors should mostly sit back and observe–no particular actions are likely helpful or meaningful to income investors.

 

10 thoughts on “Flight to Safety Causes Interest Rate Tumble”

  1. Aside from a brief foray into emerging markets last year, I’ve tended to stay out of the world markets in favor of the US ones. But the US doesn’t operate in a bubble, so what are the chances the turbulence in Europe makes the Federal Reserve postpone their next rate hike?

    1. Citadel–bingo–I think they already were looking for excuses to bail on the plan–now they may have the reason to hold off.

  2. This may not be of interest, and I understand why Tim shies away from perpetuals, but I bought 400 shares of KTBA today at $28.30. This is non callable issue assumed by ATT from Bell South is “perpetual debt”. The 6 month interest payment goes exD this Thursday, so essentially this debt issue yields 6.4% backing that payment out. Compare this to TBB which is also ATT debt and its yield is 5.3%. I like different vegetables in my soup, so owning some non callable perpetual of decent credit quality at 6.4% is not the end of the world to me. As I also have a considerable amount of term dated and “dead man walking preferreds so this helps to balance me a bit.

    1. Thanks for bringing this one up, Gridbird. I really appreciate your posts. Any thoughts or interest in CHSCO at this price?

      1. MP, I dont own any of the CHS issues now, but have had several of them in the past including CHSCO. Though basically a private Co-op, I find the company to be very trustworthy. The company is actually very big, a Fortune 100 company. I just would like the price of their preferreds to come down to reenter again. But I do watch them daily. I have flipped in and out of them for nice trading profits, but maybe I should have just bought and held as they are a quality QDI preferred and those are the types I largely need for tax reasons.

        1. I have owned CHSCP and CHSCO for some time now.

          Recently sold CHSCL for a small gain, but enjoyed a nice dividend stream for a few years.

          If you can get them for a good price, they are reliable payers, with low risk of default. note that CHS does not have common stock, so there is no buffer of common dividends.

          1. At the right price all CHS issues are good. Held them for years before selling–now am waiting – like Grid – for a reasonable price for re-entry.

            While they don’t have common shares they do have ‘patronage payments’ to the farmers/owners which they list in their SEC reports.

  3. What a difference a day makes… 24 little hours…
    we seem overdue for a time when one of these spike situations like what happened in Italy exposes a counterparty risk situation and exposes someone or some company to a big loss and/or potential rescue.

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