Interest Rates Pop as Markets Adjust to Tariff Possibilities

Interest rates on the 10 year treasury have popped back up into the 2.81% area after spending a few days in the 2.70’s.  Of course investors nowadays are reacting to each little tidbit of information that appears even when it may be meaningless info.

It only takes 1 or 2 days for most ‘stories’ to fall off the news screen sending investors (or maybe just traders) heading in a new direction.  Oh well in general we are not ones to react to these very short term news items.

Preferreds and baby bonds are trading flat today which is always what we hope for as we don’t have time to be ‘flippers’–we just want to invest and collect a reasonable income stream and maintain net asset value.

For Friday we will be watching the employment report as will all the nervous nellies.  We aren’t nervous a bit as we can’t react to individual news items.  Folks are focused on the wage component of the report–looking for any little sign of wage inflation and thus the outlook for interest rates.

We are watching the Fed balance sheet runoff as we believe this holds the key to future long term interest rates.

Here is a 3 month snapshot showing virtually no runoff in March–will April make up for the March shortfall?  Chart is in trillions of dollars.

 

 

3 thoughts on “Interest Rates Pop as Markets Adjust to Tariff Possibilities”

  1. Tim, I was wondering if SOHOK, which you wrote about recently, is worth buying at this current price of $25.90?

    I like the short term duration, and so long as SOHO can maintain the dividends up to and including maturity, it seems very much like a slam-dunk to me if held to maturity.

    I bought a starter position at $25.89, was hoping to add at $25.75, but it got away from me, :-))

    1. Hi InspBudget–I am thinking the same as you as I only got a tiny bit on issuance.

      I think it is a winner, BUT the first call is in 2019 so there is a chance someone would only get about a years worth of dividends so the yield-to-worst would be 3%. Running out to a maturity in 2021 it is a reasonable return for a short maturity baby bond.

      1. I look at this as a guaranteed 3% yield for a 1 year CD like instrument, with the Yield-to-Call getting progressive better if the issue remains outstanding after FC date.

        I actually did use funds from a maturing CD for this purpose, rather than rolling to another 1 year CD at 2.1%

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