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Income Issues Knocked Lower

Yesterday turned out to be more negative than one could have anticipated. After interest rates jumped higher last week on economic data and Fed yakker talk the PMI (purchasing managers index) came in higher than forecast yesterday–let’s face it the economy is simply stronger than anyone anticipated.

‘Don’t fight the Fed’. I had raised some cash in the last month–and of course if we would have raised more we would be better off since yesterday was very negative with the average $25/share off 1.5%—and with the Fed no doubt planning ‘higher for longer’ we will likely see more days like yesterday soon. “Don’t fight the Fed’–no use rushing to deploy the dry powder. I am a poor market timer so I tend to ‘leg in’ and out of positions–buying numerous times in a given security, but it seems obvious that now is not the time to do any buying–just wait and get paid for waiting.

Yesterday I mentioned the Federal Agricultural Mortgage (AGM) preferred issues were on my watch list–finally they dropped a couple percent yesterday–not buying yet. Others I am watching include the Spire 5.90% preferred (SR-A) issue which fell 2% yesterday to $23.93. All the CMS Energy baby bonds all of which fell 2%ish yesterday. I already have positions in these issues. The MGR 5.875% baby bond from Affiliated Managers (AMG) fell over 3% yesterday-this is now down over $2/share in the last 2 weeks.

So the list of potential buys is growing rapidly–very rapidly. I will not be buying a thing for the foreseeable future–don’t fight the Fed means it may be a couple months before we get back in the sweet spot to buy.

11 thoughts on “Income Issues Knocked Lower”

  1. Tim I did buy GS-PJ yesterday at 24.87 I may be a little early on this one. I am also watching the F to F to see if we catch some on a panic sale

  2. Tim, Re: Bond Orders,
    I came out this AM, hours ago, to place some orders that I had cash for and had worked through yesterday to be realistic , primarily using FINRA for price points, history, higher quality , then being disallowed quality for reasons of, “Not Allowed to Place Trades for this Instrument” ?
    Out of TEN, I was ALLOWED to place ONE order by IBKR. Applying today’s standard view, nothing else looks reasonable to me. So I’m out. These ‘opinions’ I print here are coming from my own REAL experiences.
    All I can say is that if the Commoner can be saved from themselves, buying up and chasing yield by using CEFs and ETFs…this is going to end with a thud….again. These instruments are the liquidity point for the Big Commercials…the dump point for exhaustion and chasing.
    Seems the Herd is being forced into a narrower and narrower channel which leads to the stockyards and the knacker’s floor. I hate to be negative, no one likes it since it makes them FEEL insecure, but there is a time for everything. Am I supposed to FEEL grateful for under half of real inflation returns? Well, there IS an eventual Return to the Mean and some eventual fabricated Crisis.
    Even IF I go strong to cash AND there IS a debacle…what next? Back to 2020, much lower interest rates? Do what? Buy up a lot of discounted stocks? Wait for a ‘meltup’ (def: A Creamerism meaning: continued hope)?
    People, be VERY cautious here. This whole schema is going to severely tested and possibly gory.

    1. Joel, I’m sorry to hear of your bond buying trouble. Were these 144 securities or just bonds that IBKR just wouldn’t allow. Could you share some of the CUSIP’s with us and many here could see if they would be able to buy them at other firms and post their results. The large institutional accounts and firms have a distinct advantage over the “normal” common investor; always have and always will as the SEC/FINRA are not there to actual help the individual investor, but control what is bought and sold. Be well, Azure

      1. A few weeks ago IBKR put a new rule in place that will not allow buys for any corporate bond with less than $50 million outstanding. Had nothing to due with 144A issues. If you are not able to place buy orders, you might want to share your opinion with them. Also affects secondary market CD’s. I am not aware of any other brokerage that has a rule like this.

        Easy example:

        Bank of Nova Scotia CUSIP  064159BY1
        Matures 4/17/23, AA2/A+
        $31.5 million at issue
        “No Opening Trades: Bond with low original issuance amount.”

        1. Tex I have been doing the same as Joel looking up and making a list and several I have tried to buy on Fido kept coming up with not available or not in inventory at this time and suggesting I call in.
          I think we have an instance of sellers asking higher prices or holding after the rise in prices the last couple months and not wanting to sell just hold.
          Just speculation on my part.

        2. Tex, I do not do business with IBKR, but if you are anyone here doesn’t like their new policy regarding bonds; why not just move your account to a different firm?

          1. Azure, brokerages are like spouses, all have good things and bad things. Present company excluded, none are perfect. IBKR let’s you have standing GTC buy orders for corporate bonds, unlike many other brokerages. This is particularly useful if you are trying to buy illiquid bonds. In Charles case, he kept trying to buy bonds at Fido, but since none were currently available, it would not let him place a buy order. Other than the new minimum size limit issue, IBKR gets around this problem. Is is worth a divorce?

            Here are five GE bonds maturing in March/April 2023 that fail the $50 million test. . .


            1. I spoke with IBKR re the not tradeable due to liquidity issue. The explanation was a bit over my head but had to do with the way IBKR operates and thus allowing limit orders. I use 4 brokerages. All have their advantage but no doubt in my mind (and results) IBKR is best for bonds. Especially if one doesn’t wish to constantly check on availability and waste time calling fixed income desk. As Warren Buffet says, “I can buy anything in the world except time”. Also avoids chasing yield syndrome

      2. AZ: I TOYALLY avoid the 144 issues that show up on FINRA!
        I dig around alot on the laptop, while the wife has me watching some drivel after dinner. From that I prepare a hot list. Tex2’s list above is a perfect example.
        I try to do as much advance DD before I consider placing an order.
        I HAVE found out the best time to p[lace orders in very early AM and often get fills.
        Here’s a Woul;d-Be: Would be nice if any brokerage would just tell you with a pop-up when I enter a security onto a Watchlist. RIGHT!
        I know one has to work within ‘What the Market is offering OR wait, but that is exactly what the King has Lords for too (Extent of my politics anymore…historical rhyming).
        I’ll keep a list of the NO-Nos and punch them in for you. Off to the maintenance machine.

  3. TIm, this afternoon (2pm i think) the Fed will publish minutes of their Jan 31-Feb1 Meeting. It is old news, but might give insight to solidarity among members as well as long-term projections.

    1. Windyducat–will give a bit more color and the markets will react, but I think we can guess, in a general sort of way, what will be in the minutes.

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