Investors are demanding a higher and higher ‘reward’ for holding U.S. Treasury paper–right now the demand is for 4.74% on the 10 year treasury. All the talking heads on the business channel are flailing away trying to identify why rates are moving higher while the economy has ‘cracks’ in it. Honestly the cracks in the economy have not been deep yet–employment remains extremely strong, although maybe very slightly weaker, but to call employment weak is just silly. Let’s face it – with the amount of new ‘paper’ coming out of treasury why should rates be lower? Huge supply and lack of faith in the U.S. government to control spending–period-enough said.
Yesterday was a slightly painful day for income issues–even with a pretty large allocation to CDs and treasuries in our accounts it has been fairly difficult to gain much ground–lots of interest coming into the accounts, but the modest preferred and baby bond allocations are neutralizing the gains as they tick lower. At this point in time I am looking for CD rates to move higher–but now I am looking at the 6 and 9 month variety–the more time that passes and the higher rates move the more I want to make sure I have some dry powder available to buy at interest rate peaks (as if I can successfully identify that peak).
I posted info on a new baby bond from SWK Holdings yesterday–a very interesting company–specialty finance. This company started off as a software company back in the 1990’s–and slowly morphed into a specialty finance company. They own royalties rights in various drugs and make term loans in the health care sector. Very interesting company and if their financial statements are trustworthy their net income is somewhat lucrative. I have no interest at this point in time, but will study it further.
Continue to sit tight and see where we are headed–equities are soft this morning as rates rise–could be a very tough month.
Well, today I gritted my teeth and bought CHSCL at $25.00 7.5% fixed perpetual. Might be a short term mistake, but I think (hope) it will be a solid investment for the long term. We shall see.
Good luck Randy. Hope it’s a home run for you.
I hope my CHSCN will flip over to SOFR on reset- would be a max of 8% unless they don’t – then will remain at 7.1%. But- it can be called in March, so maybe a moot point.
good luck
Employment is going to be a misleading indicator for the next few years because of the massive demographic changes that are blowing up the models used to measure unemployment.
Maybe finally the bond vigilantes are demanding higher rates as the risk of US debt is increasing exponentially! Should of happened a long time ago!
Yesterday was fairly painful on paper… offset by getting 45 divvies in last two days.
Ready to buy if prices can drop enough.
Gary–a familiar tune you are singing.
Yup. Almost as bad today…no divs tho.
Did grab a few NEWTI @24.02 to add to what I had. Couple others didn’t bite- have a feeling there will be opportunities now that rates are rocketing, and the House / Congress is in complete disarray with another round of funding coming in a month and a half.
Personally I am happy to see the yield curve “flatten” in the sense that term premium is returning to longer dates notes and bonds.
The yield curve is “disinverting” “uninverting” “normalizing” or whatever term we want to use. The 2-10 spread is 39 BPS as I write this and the curve is *still* inverted, but less so.
To me every single investor should be in favor of a normalized yield curve.
At this point 5% yield looks like a magnate for the 10 year.