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Here We Go!!

So in about an hour we get the decision on a interest rate hike – 1/4% hike. I would think this would get an react whatsoever, although the algo’s will push the indexes up and down some just because that is what always happens. As always the Jay Powell presser after the announcement will be the important news. To me it isn’t really news since he will say ‘we are data dependent’ and will await further news to make decisions in the future–to say anything else would signal another pause or an end to hikes and there is no way this Fed would want to send this message.

Last night we had the announcement of the PacWest and Banc of California merger – it looks like it will work out just fine for PacWest 7.75% fixed rate reset preferred holders as the PacWest issue is to be replaced with a like issue of Banc of California preferred. PACWP is trading up $2.66 right now at $20.86 – still at a high 9.29% current yield.

Also of note is the acquisition by Atlantic Union Bankshares (AUB) of American National Bankshares (AMNB). AUB has a 6.875% preferred stock outstanding and there is no affect on these shares with the merger.

So let’s sit back and see what kind of news we get from Jay Powell and then we will see if we get a jump in CD rates tomorrow (or even today)-maybe the banks will be stingy and not move rates higher–who knows.

8 thoughts on “Here We Go!!”

  1. The best advice I’ve heard all week and its something we know intuitively but its good to hear anyhow is: “Buy the last hike of the cycle and go out on duration”. Its hard to say whether this will be the last hike, I suspect we are getting close but wouldn’t be surprised at a Sept or Nov hike. I’ve been long duration from the very beginning of this rate hike cycle and am surprised its even lasted this long with all the push back from mass media monotony. I think now is the time to double down on longer term CDs, US Treasuries, GICs in Canada and few high high quality IG Corporate bonds.

  2. I certainly don’t know the future direction of interest rates or inflation. So I’m trying to just stay somewhat hedged with a mix of fixed and variable rate issues. For example, in my variable rate bucket, I recently bought a utility preferred from CenterPoint Energy (15189TAS6) through the bond desk that will begin floating on 9/1/23 at the LIBOR plus 3.27%. I was able to purchase it below par so I’ll make a nice annualized gain even if it does get called.

    Earlier today, I bought a floater from Bank of New York Mellon (58551TAA5). The rate is the greater of 4.00% or the Three-Month LIBOR plus 0.565%. I bought it for $80 so my yield on cost will never be below 5%. The current yield should be around 7.7% on my cost. Throughout most of 2020/2021, this one traded pretty close to par so it has capital gain potential too. I can sit with it and be patient.

    Incorporating the floaters makes me feel less compelled to follow every tidbit of macroeconomic data…much of which seems to be conflicting and confusing these days.

  3. I try not to be genius as I hate to eat crow as its nasty tasting. So that being said while listening to conference in car while finishing off my Saints and Patriots season win total bets from sportsbook, I gathered a few things.
    —— He has stated they are in restrictive territory.
    —— Time is needed to let all these furious hikes from past year and half to do their work.
    —- Mentioned cuts would occur in time when appropriate (definitely none this year).
    ——Data dependent and letting process play out.
    To me its hard to fathom that many more rate hikes are in the offing. And yet long end is lower now than it was 9 months ago, despite many more Fed hikes since then. Many quality perpetual preferreds yield barely more than a CD. I toe in on some where I see a blip of relative value. But I feel I have time still in this area before I dig in deep in the HQ fixed perpetual route. But since I know I can be wrong, I still play all angles.

    1. Hey grid. 6.5 for the pats. That’s a tough one. I could see them eaking out 7 wins. The team isn’t great, but defense should be solid and bill O’Brien coming back may bring some life to the offense.

      BTW, if you are feeling frisky, lay some of your gambling winnings on MITT-B. Live a little .

      1. Maine, you are covering my thoughts. Patricia had no business being OC last year. OBrien has the street cred there. Schedule is tough, but that always gets overplayed from last year, things change. Very solid T-10 D. 7-10 would be their worst percentage record since 2000 and it would still cash the ticket!
        I like to gamble more on sports and not so much on stocks. Iowa Hawks 7.5 is my big play. No Michigan or OSU this year!

  4. Finally, Powell gave a timeframe for a return to 2% inflation. 2025. A realistic timeframe

    1. Powell has no clue of any timeframe, it’s a total guess. As he had no clue the initial inflation burst wasn’t in fact transitory.
      What the Fed ought to be doing is telling the country, the media to put pressure on their government to stop liquidating the market with trillions of dollars made up out of thin air.
      Anyone in the media ask him what changed between the meeting they paused rate hikes and the meeting they just raised again? Something in the data now showing 2025? Powell has no more clue than some of the very good posters on this site.

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