How About Those Interest Rates

Wow—times change and reactions to interest rate movements change. I used to always say that it was not necessarily the direction of interest rates that mattered to common and preferred stocks (and baby bonds), but instead was the speed of movement. Well we are seeing a different story this week.

The 10 year treasury has moved higher by 20-25 basis points to 2.75% in 3 days–a pretty big move–common stocks are flying and income issues are mostly just yawning (up and down a few cents). All of this based upon Chinese trade–I am tired of this issue–let’s get done so we can maybe make decisions based on market fundamentals–not rumors.

11 thoughts on “How About Those Interest Rates”

  1. Remember Wendy’s commercial from the 1980’s. “WHERE’S THE BEEF?”. Lol – that the trade deal the street was going up for today? This hardly is going away anytime soon

  2. Days like today are why I own “on the bubble” preferreds like VNO-K (although I don’t own that one). Those bubblers are immune to the first 25+ bps of rates going higher because their coupons are already above going rates and the stocks are just trading based on call risk. TDE/TDJ and WRB-B are a couple of the bubblers I own.

    1. Landlord, My TDJ said it was lonely and missed its siblings so I bought some TDE today to make him happy. This has become an “8 is Enough” family. But gonna let it play out as a place to hide for near term.

  3. What makes the violence of this swing even more crazy is that it’s in front of a 3 day weekend when there’s no real reason to believe that the Chinese negotiators don’t go home after today with nothing definitive happening and we get to do this all over again on Tuesday but yet again in the opposite direction. Maybe “it’s different this time,” using that old kiss of death cliche…

    1. 2whiteroses, 3 day weekend? Just to clarify, you mean this Monday’s Columbus Day? The equity markets are open and the bond market is closed this Monday.
      You mean Greece and Italy’s governmental bonds are more secure than the US!!
      Major 10 Year Government Bonds:
      Australia 1.09
      Brazil 6.75
      Canada 1.54
      France -0.27
      Germany -0.49
      Greece 1.45
      India 6.73
      Italy 1.06
      Japan -0.20
      Mexico 6.78
      Netherlands -0.35
      New Zealand 1.18
      Portugal 0.21
      Spain 0.25
      Switzerland -0.73
      UK 0.71
      US 1.75
      Life is inherently risky. There is only one big risk you should avoid at all costs, and that is the risk of doing nothing.”

      1. Thanks, Nomad and Ken…I didn’t look hard enough to know for sure about the markets overall given it’s a Federal holiday but still, in general, having the bond market closed makes it more difficult to get a good feel for what preferreds and baby bonds ought to be doing… That uncertainty will probably be easily overridden by whether or not the Chinese go home without any big Macs in hand. Glad you set me straight…

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