Yesterday interest rates popped–moving up to 4.54% which was about 9-10 basis points above the low for the day. While the S&P500 managed to claw its way back to the green (barely) on the day and the NASDAQ closed at a record high the DJIA closed sharply lower. Obviously tech is still driving the ship. This morning we see equity futures are off quite a bit (1/2% or so) and interest rates have moved up once again to the 4.57% area.
We are, of course, on the edge of potential big moves in rates. Seems we are always on the edge of big moves. Today we have the Fed Beige Book being released at 1 p.m. (central)–while technically this shouldn’t push rates higher or lower we all know that markets can find a way to exaggerate movements. Friday we have the personal consumption index (PCE) being released and this one does have the potential to blow the lid off rates–or drop it sharply if we get a surprise drop in inflation factors.
Yesterday Fed yakker Kashkari pounded the table on keeping rates ‘higher for longer’–I believe he said that rates could stay high ‘indefinitely’. This guy is a clown–no one was more dovish during the period of zero interest rates–even in the face of substantial inflation the dude had to drug kicking and screaming into the higher interest rate camp. What a clown.
Yesterday I spent a little time looking over the Tmobile/U.S. Cellular acquisition. It looks like most U.S. Cellular debt will be exchanged into Tmobile debt–probably a good thing long term. Of course Telephone and Data Systems (TDS) preferreds got a decent lift on the deal, being the controlling shareholder in U.S. Cellular. On the other hand the deal is kind of murky and won’t close for about a year–lots could go wrong. Lots of questions to be answered yet as U.S. Cellular will continue to own lots of ‘towers’ and continue to own ‘spectrum’–what does their ‘pro forma’ income statement look like? What does the TDS pro forma income statement look like after the deal closes? NOTE–I currently own none of the affected securities, although as written about here (Nothing Wrong in Owning These Baby Bonds) I previously owned some of them.
Yesterday I bought a few 5.40% CDs–holding back a little cash for a potential NewTekOne baby bond purchase when the new 8.50% issue starts to trade. Not much movement in our portfolios in the last couple weeks as May was a ‘lite’ CD maturity month, but June, July and August are fairly big which should add quite a bit to our coffers–then we will see what direction we go.
In a way, I think Kashkari is correct.
I think, and I can be wrong, we should allow interest rates to be around the current levels (or say – 1% above inflation at all) times.
This has some beneficial results to the economy generally:
– less speculation (because the opportunity cost is now 5%)
– less unnecessary risk taking.
– risk free income to retirees and savers (which one would assume is good)
The way to manage recessions and downturns should be more focused on Fiscal measures instead of monetary methods. Of course this requires some measure of rationality and non-capture by the rich, elites etc
It’s starting to look like yields aren’t ever coming down until everything falls apart. The Nvidia mansion at the top of the hill still hasn’t seen any cracks in the foundation. Until that happens I guess everything with a yield will just continue to fall daily. Come on recession!!!
Has anyone seen new issue cfgh and/or c cc trading?
CFGPL on fidelity
CFG H is 24.97
Trading as CFG/PRH at Schwab; day’s range: 24.96–25.10, so far. Bought 200@25.0
Last year saw good buying opportunities in preferred in June and August. Keep your powder dry. Not as much as Bea, but I have about 1/3rd. Cash holdings in MM funds.
Interesting situation.
Their survival hangs on the deal. Without it…. I fear their assets may end up being auctioned off to the highest bidders.
I see the 2 year is pushing 5%. Lets see the street take a gulp. I’d like to watch some Fx to float’s go under par, with credit, again.
IYP, It is not clear what you are referring to.