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Interest Rates Putting the Hammer to Markets

Wow the 10 year treasury is now trading at 4.63%–all based upon stronger retail sales continuing at strong levels. The consumer is saying buy, buy, buy–probably taking the credit card out as they just can’t help themselves.

Equities which started the day solidly in the green just couldn’t old gains as interest rates rose and the S&P500 is now down almost 1%.

Accounts are mostly red again today–worse than last week. I am eyeballing the RiverNorth Opportunities Fund 6% preferred (RIV-A) for my ‘safe’ bucket as it is off more than a buck in the last week with current yield approaching 6.50%–we’ll see if I take a nibble–maybe tomorrow. I like this issue at 6.50% with a A1 Moodys rating.

Well let’s see where the afternoon goes—no doubt there a fair amount of fear in the markets. I am not a seller–and not yet a buyer, but maybe soon.

25 thoughts on “Interest Rates Putting the Hammer to Markets”

  1. All I can tell my friends is this is why we are riding so much on 6mo and less, or fixed to floats. Whenever everybody gets on one side of the ball its time to be concerned. Another concern, is when I review a friend w 100 holdings and 95% are all green including all divd reinvestments.

    The Citadels of the world dont get +75 in one year by following the crowd!

  2. Those credit card consumers that “just can’t help themselves” are paying me 2-3% cash back. I have a 2% cash back Citi card and a 3% cash back Paypal (for everything I pay for using paypal). Stuff I buy and need anyway and I pay them off on time every month. The cash back I see more than pays my annual electric bill!

    That said, the average consumer is painting themselves into that proverbial corner…chickens coming home to roost before long methinks.

    1. There’s a 5% Capital One WalMart card as well as a 5% Amazon card. And sometimes, you can get a bonus as well.

  3. This market reaction isn’t even as bad as it could get. The test is to see if there are bargain shoppers tomorrow.
    The reality I suspect is in the back of people’s minds is no rate cut for June and rates higher for longer. I haven’t looked at all the builders, just 2 and they are down but still haven’t tested their 52 week lows. Couple people here predicted oil and oil stocks had run up too far by Friday and would drop today as the tension in the Middle East eased over the weekend. Oil futures dropped but just a normal adjustment but oil stocks had a decent fall so proved they had been over bought.

  4. Noticed yield inversion between 2YR and 10YR now touching below 30 basis points. Maybe a sign that finally the market coming around to the recession delusion most have been going off of now for how many years? Combined I guess with higher for longer talk. Would be nice if the Bond market headed in a direction that makes more sense. More sense in that if you are taking more risk from duration, then you should be paid for it. Would love the 10 yr around 5.75% – 6%, but I wonder how much of my capital would be destroyed getting there. I suspect a hefty amount.

    1. Demand for the 10 yr last week was weak as I understand it. And this was after it was reopened from the previous auction with lower prices (higher yields)
      So we may get to 6%, however, with all our debt that will take a generation to pay off, if ever.

      In my opinion, so that an $10 will get you a cup of coffee, the government may rely on more short term debt issuance. Roll over year after year at a slightly lower rate until inflation is at the 2% level and the Fed sets interest rates at about 3%. Where the long term yields ends will be interesting.

      Be well
      Be Safe

    2. Pig, I am game if you are. Every time something has plummeted from 2013 Taper Tantrum, through 2016 interest rate scare, 2018 credit spread blowout, Covid, and past couple October rate scares, and last March bank rout, etc., there has been serious money to be made. Way more than the 6%-7% coupon clipping brings. Im ready for a serious downdraft big game hunting expedition, not some weanie 25-50 cent downdraft. Bring it on Pig…And you, me, and Mr. Pig Pile Sr. can dump them IBONDS and buy up them deals!

      1. Grid, pig pile Sr never smiles small when he tells me all about his 3%+ fixed rates he’s still getting on his early I-Bonds. I even tried to get him to dispense with his 0% fixed bonds for the 1.3%. Nothing doing. lol

        Trust me, I know you’re sitting there waiting to pull the trigger on market strife.

        1. Ha, I had to throw Pops name in there because I knew there would be 0% chance he would ever part with them!

    3. I think if you get to a 6% 10 year your other fixed income will be completely obliterated.

  5. For once I am going to patiently wait to buy. If things are going down now pretty good chance they will go down more. I will keep an eye on stuff like PSA-x and etc, A-BBB+ rated material, to see how close it gets to my lower cost basis I currently own at. It is not even close yet.

    1. old PSA selling $300m 30yr notes 5.35% was interesting to me we all know it has been rolling heaven for years for them in the low int rate environment..commiting to 30yr paper now! –so I am guessing a lot of their pfds will be truly perpetual in a ‘normalized’ interest rate environment. Well maybe not the ‘H’ w 5.6% if we do get a pullback they’d probably pull the old switcheroo on that one— but the ‘L’ at 4.625 now yielding 6.17% stays outstanding a long time? that PSA-L around 19.75 is looking kinda juicy as a place for some of my SGOV money. Might throw a stink bid in w this int rate volatility.

      Smells like ‘safety’ like a GAM-B to throw in the ‘safe’ mix. And the MET-E is yielding 6.07 at yesterdays close (long that one and GAM-B) I don’t mind moving cash into these names, a lot of that cash pre rate rise was in Discover ‘high yield’ savings ..which these days is 4.25%!! pickin up pennies with some strong safety anchors….. Bea

      1. Bea, nice to see you drop in.
        Last purchase of GAM B was at $24.45 on 2/09/24. We still have a ways to go to see the last 52 week low. No one here likes future predictions, but I don’t think the reality has really hit the market that there may be no rate cut in June. See what happens as we get farther into May.

        1. My GAM-B basis is 24.56 ok w that not adding 1% of portfolio, cash alternative to me; I did get my PSA-L at 19.69 and MET-E at 23.08. Busy morning in other areas as well.

    1. I to picked up O- today. Actually tripled my position. Being that Realty Income has trademarked their common as “The Monthly Dividend Company”, I see absolutely no way they would ever miss a dividend on their preferred. I’ll take that 6.3% divie and put the shares in the sock drawer.

    2. Pig
      cash in your pocket on tvc is a bit over two percent.Holding to maturity gets you more but for many that is not enough to hold. I guess it takes different strokes for different folks. good luck. sc

      1. What other comparable bonds are you aware of that have the same YTM as TVC? Please limit to those rated Aaa/AA+ or better and for the same guaranteed duration.

        1. Is TVE being ignored just because it’s so close in description to TVC? It’s YTM is 5.51% right now, but it does provide higher current than TVC @ 2.57%. I’ve owned both for a few years now, figuring even the current covers my 2.25% mortgage interest and since I bot to hold the rest is risk free gravy vs paying off the mtge… Granted you could easily do better assuming some credit risk, but given the concept was to cover the mtge risk free, not anything more exotic, they work for me.. go vols.

          1. 2WR, I have positions in both TVC and TVE. TVC seemed to be drifting higher YTM today, thats the simple truth with me today.

      2. sc4, yes certainly not enough for some, but for me its good enough. As Dick alluded to, challenging to find anything of that quality for that high of YTM at the moment. I do have some of the same TVC that I picked up closer to 6% YTM last yr.

  6. Maybe they just can’t help themselves; or maybe they expect prices to continue rising and want to trade their nominal dollars for their purchasing power now, before that purchasing power erodes further. I personally am rolling the proceeds of my next maturing CD not into another CD, but into some long-needed home renovations, the price of which is probably rising by more annually than what I can get on a CD.

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