Interest Rates Popping Sending Income Issues Dropping

The end of the trading day saw the 10 year treasury pop up to 2.77% which sent quality income issues lower,which had a strange jump in price yesterday back down. When the quality issues popped up yesterday after a big tumble the previous day we thought it seemed strange–guess investors got so excited with the couple extra nickels they could garner with higher current yields they couldn’t resist moving prices higher.

Worse than the closing treasury prices are the overnight prices in Asia as the 10 year hit 2.80%. When we wrote the Monday Morning Kickoff this week we mentioned that traders were looking for a move to 2.80% if prices breached 2.68/2.69%, but we were thinking this would take a little longer than 4 days. With the employment report first thing tomorrow we will see how markets react.

At this moment we would pause any buying until we see how things shake out in the next day or two. Short duration baby bonds and term preferreds continue to trade reasonably strong and can be bought. Perpetuals, even high yield, should be paused–why buy today when you may get them 50 cents cheaper next week?

We are kind of drooling over some REITs-in particular KIMCO (NYSE:KIM) which is a investment grade shopping center REIT. I reviewed their financials from the 3rd quarter and they were fine and they should be releasing 4th quarter results soon (corrected–to announce 2/15) and I will be anxious to see them. We expect they will be as expected and maybe that will reverse the share slide. Shares closed today at $15.36 with a current yield of 7.29%. We will watch–who wants to catch this falling knife?

3 thoughts on “Interest Rates Popping Sending Income Issues Dropping”

  1. Yes, some of the better names sold off hard this morning but are recovering significantly, often symptomatic of a (perhaps only short term) bottom. Guess some folks feel like they don’t want to miss what seems like a good bargain.

  2. Yes–it started off pretty rough this morning down around $14.70–I am watching it also as I would like to get some of it.

    Interesting that REITs in total are off just a bit today which leads me to believe we may be at a short term bottom in them. We shall see I guess.

  3. FYI I bought KIM yesterday at around $15.50. I’ve bought and sold it at higher prices last year and read so many good articles on KIM I couldn’t resist jumping back in yesterday. Maybe too soon but catching a bottom is largely luck, and these issues can reverse and move up quickly and leave you empty handed, so I’m buying a little bit here and there to average in on an overall good price.

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