Over night the 10 year treasury yield moved lower to be trading at 1.78% right now (6 am central).
With turmoil in the equity markets the last thing we need at this particular moment is a giant spike in interest rates.
The increase in rates over the last 6 months has been at a pace that has made the pain in preferred stocks and baby bonds somewhat bearable. The average $25/share issue has fallen about 4% in the last year which is plenty –in particular with our current high inflation rates and with low coupons we are being hit with a double whammy.
I continue to hold baby bonds with short dated maturities and term preferreds which have performed very well in the current environment. Of course they have fallen in price but the reductions in share price is a fraction of the average perpetual preferred.
I expect when we get stability in the equity markets we will see interest rates move back into the 1.80%’s – on the way to 2%–I just hope it takes a month or two to get there.