Interest Rates Still Falling

With weak growth in Europe and most of the globe and economic numbers that are weakening in the U.S. interest rates continue to fall.

The 10 year has traded down to 2.36% today and is currently trading around 2.37%. It was only 10 days ago that we wrote that it looked like rates would be falling into the 2.50’s%—and the ‘smart people’ on the financial news said rates would not be falling much if any further and likely would head higher. Only goes to show that no one knows with any certainty what rates will do.

These falling interest rates have made all of us income investors look like genius’s. Preferreds and baby bonds keep creeping higher–a few pennies here and a few pennies there. BUT we all know that these interest rates likely means that any company that is at least mid-quality are preparing prospectuses to head into a new ‘refinancing’ period–we will need rates at these low levels for a month or two before we see this occur, but you can be certain it will occur.

We don’t see anything unusual in the income markets today. The usual suspects are moving around – the junky CBL preferreds are trading down (of course) on high volume. We see the Arlington Asset Investment 8.25% new preferred trading near a new low at $23.08–think someone screwed up on pricing this one-you can see it here. Also the new term preferred from Priority Income Fund is not getting much traction and is trading in the $24.70 area–it is here.

7 thoughts on “Interest Rates Still Falling”

  1. Hi Tim,
    The Arlington Ai-C preferred looks too good to be true – is it because it is not rated? Does the underlying have a solid rating? Thank you!

    1. Debbie, AI is still losing money: ROA -2.22% ROE -27.79% equity – 27.87% last 52 weeks (a bit of a trouble company IMHO). IF you are going to invest in Arlington you may want to look up the credit stack at the baby bonds (AIW, AIC) at least you have a defined maturity date and a bit safer.
      Not all those who wander are lost, Nomad

      1. Thank you, Kind Nomad! Any advice on rate direction? I’m seeing good gains on my preferreds

      2. Nomad, Jerrymac from SI who knows the underwriting prices of preferreds before the underwriters do just posted a tidbit on PFX. He heard parent is buying back shares at sub $17. Said the share count of PFX has been reduced from 12 million shares to 10 million shares. That is encouraging news for us.

    2. Hi Debbie…if mortgage investment industry exposure is what you’re looking for, the ALLY-a floating trust preferred shares might be a better way to go.

  2. So far, only seeing part of the impact of a falling 10-year. The pace of new issuance is up. The redemptions cannot be far behind. Lots of folks napping I think.

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