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Interest Rates Trying to Breach 4% Again

With all sorts of pretty good economic news interest rates are trying to move higher once again–yesterday the 10 year treasury closed at 4.01% – the 1st close above 4% since 7/10/2023. We’ll see what happens today as we digest more economic news–rates have backed off a bit from the 4.01% close yesterday and are at 3.97% right now.

The core personal consumption expenditure index (PCE) has just been released at .2% month over month–year over year is 4.1%, both a bit better than expectations.

Equities took a tumble yesterday, but are showing a decent move upward this morning. I see no reason whatsoever for equities to move significantly lower. Economic news is decent and there is plenty of cash sloshing around the world–of course one never sees the drop before it happens–black swans don’t announce themselves in advance.

Yesterday I went ahead and added shares of Affiliated Managers Group 5.87% baby bonds (MGR). This is an add to a position I already held. I am still awaiting trading in the new Eagle Point Income (EIC) 7.75% term preferred (EICB) – I see that Fido has it loaded in their system so we may see trading today. I will buy a partial position assuming trading in the $25 area–that will likely be my last buy until mid August when more money becomes available.

30 thoughts on “Interest Rates Trying to Breach 4% Again”

  1. I have to confess, lately I have had that “deer in the headlights” look when it comes to what to buy. With 91 days, 3 hours and 29 minutes until retirement my main quest is for income with some modicum of safety. I had a little cash loose in my IRA, so I picked up another 100 shares of JXN-A and something I normally don’t do, I bought a few shares of a utility CEF UTG.

    1. But who’s counting, right? Do you have a short-timer’s calendar? About 28.5 years ago I got out so fast the swinging door didn’t touch me. Never looked back.

      Good luck to you. Try to regenerate some of those youthful dreams you had and retirement can be the best time of your life.


      1. Its been 13 plus years for me and havent hit 60 yet, but its coming! Sure has went quicker than my last 13 years of work! Camroc, one thing you will think is funny. I have 2 sets of friends. My golf friends and my close friends. My close friends are spread out and still work. My golf friends are mostly in their 70s and 80s so I spend considerably more time with them. I hope someone in their 50s is willing to play golf with 80 year olds when I turn 80 and return the favor, ha.
        Trying to think longer term, I did make a buy today. Somebody needed to evidently sell 10 5.75% $1000 par 2033 PECO subordinated debt bonds, so I took them off their hands at $943.50.

        1. It’s been 4 years for me and I’m 63. Golf 3 times a week up here in upstate NY. (Only cheap thing up here is golf, we have extremely nice courses at a pittance). Met Grid on Leaking Alpha a couple of years ago and he has graciously guided me in the world of dividend income.

          1. Sf, Upper NY is on my list to visit when GF retires in a couple of years. Not a city guy, so NYC (or any metro for that matter) isnt on the list! Hitting Mackinac Island and Door County Wisconsin in Sept. A driving vacation…Ugh!

            1. Grid, Let me know when you mosey up my way. Maybe get in a round. Always send the GF to the Finger Lakes wineries while smacking them on the course 😉

      2. LOL ! Yes, I do with red X’s. I am 74, don’t golf, so I can’t join Grid’s older golf buddies. I have been doing the “1 more year” thing for the last 7 years. I work in aerospace on the left coast where I am on a launch support team. It just doesn’t get old, but I did, so it is time, probably past time.
        Wife and I are runners, a lot slower these days, but still cover the distance. We have marathons and half marathons scheduled out for the next year in cities we have always wanted to visit. Already ran Boston twice and Chicago, can’t wait to run the one in Nashville, first mile is right down the Honky Tonk row on Broadway 🙂 We live near Pismo Beach, bought a couple nice bikes, plan to spend more time riding and running there. But yes, a lot of things we said “someday” to are on the list.

    2. Well, there is a piece of good news, you can be paid something like 5.5% per annum risk-free until you figure out the next move 🙂

    3. Nice! I am 63 and retiring on January 12th from NASA! Odd date but it turns out to be the best day to go due to reimbursement of vacation days. It’s an odd year as you can retire in 2024 and still be in 2023 as a leave year plus collect two paychecks in 2024 which I plan to put 100% of them into the TSP/401k.

      NASA is my second career and just hit 20 years with them in June so that gives me a bit more pension. I am still pondering whether to take social security now or wait. My instincts tell me now as invest that money because I am not sure how long it remains solvent. I’ve paid max into SS for 30 some years now so I should get something like $3200/month if I take it right after retirement. Pension and SS will pay me close to $80K/year.

      The rest of my income, if needed, will come from investments and I’ve learned a lot about preferreds, baby bonds, treasuries, CDs, etc. from the smart peeps here. I don’t have a huge account like others but it should easily add $50-$60K/ year. I have no debt except my home which i decided to take cash out a couple years ago at 3% – I didn’t need the cash, but rather an investment strategy. I now live in my 2700 sq foot house in a golf course community for $1180/month payment and I have absolutely no plans to pay it off (taxes and insurance add about $350/mo.). Most of the cash out went to investments! If I ever want to downsize, I could rent this place for $2000+ easily.

      It’s been interesting planning for retirement to be sure. I am fortunate to have a pension as well – never thought in my early career that I’d work for the gov’t but NASA was a natural extension of my career and a rewarding one at that – the pension just turned out to be a nice perk – plus I get to keep my health insurance into retirement which is a huge benny. All good stuff and I have several books to write and tons of plans for retirement – 5 months to go!

      1. Yaz talking to my wife last night and she retired before me. Couple things for those who are planning this and going Medicare. Her advisor assumed ( wrongly) that retiring mid month that the company she worked for would continue work insurance coverage until the end of the month. Wrong, the minute she walked out the door the insurance stopped. Each company is different. Second, she was paying for the deductible until she maxed out on it. Unfortunately she quit in Sept and what she built up in paying the deductible started all over the first of the year.

    4. I’m bumping up on 60 but haven’t pulled the retirement trigger yet. I’m a teacher (3rd or 4th career) and will be eligible for retirement after 8 years in Oct 2024. Keeping the healthcare, at a fee, is the main benefit, plus $40 per month at 65 lol. Hope to make it until then but the state of teaching my push me to call it quits sooner.
      Fortunately, I saved and invested from my other careers which included lawyer, business exec/entrepreneur and real estate investor. I’ve enjoyed this site and learn from the members as I’m risk averse at this stage in life.

      1. Dividend, I have went full circle on this insurance stuff the past 13 years. When I retired I could have stayed on school plan, but it was like $400 a month cheaper getting my own underwritten private insurance plan, so I bolted. Then Obamacare came in and screwed me over, and eventually my health insurance was more than my principal and interest on my mortgage payment. But once I got out of the 20th century mentality and figured out domestic partners wasnt a code word, I got on my GFs plan and have had it for free past couple years and can ride it until medicare. Big time savings!

  2. Contributors to this website are, on balance, somewhat conservative in their investment philosophy. Just the comments to this post by Tim, and Tim’s comments, are basically saying that the markets are not being realistic as to the economic/financial problems facing the US. I feel somewhat the same way myself.

    However, the old saying, that Wall Street climbs a wall of worry in a bull market, seems to apply to our current markets. Consequently, when almost everyone at III eventually throw in the towel and become bullish, it’s probably time to get out. I ‘hope’ I do so. Unfortunately, ‘hope’ and a few bucks buys one a latte at Starbucks.

    1. I think the common stocks are having a nice ride, but preferreds in general I dont think have moved a lot this year. I just rotate out of ones that have climbed too fast or ones that have a defined pattern. What is important to me is time in the market. The dividends and interest really piles up. Examples of rotations into are wfc-a/q, amh-h, afge, mer-k, ebbgf, usb-p, aizn

  3. Tim, can you explain your rationale in buying MGR at current prices and not in the $21-22 range earlier the last few months?

    1. Perhaps the fact that Tim said he was looking at buying MGR drove up the price. The Man Moves Markets.

      1. Private, look at the chart for MGR, it has two humps of a Camel with inverted candles.
        Just kidding, I only look at charts to get a feel for the movement of a stock. This is only good when seas are calm. Works in general until something happens to roil the market then I get caught on the wrong side of the trade. A lot of us including Tim buy a stock 30 to 45 days prior to x- dividend and use the run up to book a profit equal or greater than what the dividend is. To stay familiar with a stock I hold a core position and trade around it. The reason I referred to MGR and the chart is to show others the two “humps” where it ran up prior to ex dividend then you see the drop afterwards. Also notice the ebbing highs of this stock. Interest rates have been climbing and this stock pays less than 6% at call price of 25.00 so it has been making lower highs come dividend time. I am happy to make my coin selling it at 23 and probably buy back later about halfway through the next cycle

    2. Mhug, that is because Tim is not a market timer, but buying of value to something he already owns. This is a good one to trade in/out of, as it now has roughly bottomed out 4 times in a year. I have been in and out of it. Getting in around $21.5 and selling at $24. Its sister issue of mgrb is good as well. I buy at $17 and sell at $19, which i have done several times too. I currently have a position.

      1. Mr. C I didn’t think I was the only doing this, glad to see your part of the group.
        I don’t normally talk about trades except in this case Tim wrote an article on this note on SA and he shared with others on this site and a few others have been talking about MGR.
        It’s nice people have responded to Mhug’s question. You confirmed the pattern I mentioned. How long this holds up I have no idea which is why I said if something changes you could end up on the wrong side of the trade. That is when novices panic and say I am getting out at a loss before it goes lower.
        I may not be as conservative as you Mr C just more cautious. Why I am repeating I see a pattern of lower highs with MGR and even though Tim is adding about 45 days prior to x-divy date I took my marbles and profits out of the game because I don’t want to be holding waiting for the run up prior to the x-date in the middle of the upcoming budget battle.
        Then again, there might be no fireworks just those fake safe and sane ones.

  4. Tim,

    Gas Prices ramping up again & rig count keeps declining…consumers will pay for the fuel costs at the pump, grocery store, transportation, & almost every other consumer product. Could keep the higher for longer, or just higher in play for the FED.

  5. I think the greatest threat to equity prices is the lack of fear and protection at this point. E.g. no perceived threats has pushed the 30 day Put/Call ratios to the bottom of their range. We’re intermediate overbought. I suspect better prices lay ahead in the fall and have positioned accordingly.

    1. NCSI–I agree with you – everyone is so bullish – up, up and away. On the other hand one must balance their emotions – at least if we have fear we get paid to hold the cash. You can be certain that there is a black swan just around the corner and it will show itself–unfortunately whether it shows it self next week, next year or in 5 years we can’ predict.

      1. Tim and NCSI – Absolutely agree about the danger of the current goldilocks outlook.

        The BOJ hiccup in interest rates (17 bps jump in 10-T and stock market dump) show how vulnerable all the markets are.
        (I picked up TLT at $99, down 2.2% in an hour.)
        There are numerous opportunities for black swans ahead.
        Ukraine nasty surprise is my leading candidate but the horizon is wide open.

    2. Add that with sentiment indicators very optimistic after a 18% market climb, the magnificent (7) stocks carrying the breath of the market, entering a seasonal poor performance period (Sept-Oct), the continuing inverted yield curb, credit lines drying up, and a Fed saying “rates higher for longer”. What Me Worry!

  6. Tim

    Does it strike you as odd that between announcements from the Fed, ECB, and the BOJ, the announcement from the BOJ had the largest impact on US rates? Are international flows unlimited or constrained? If all three major central banks pursue tightening, will there be sufficient liquidity to finance our $2T per year deficits? Will the term “crowding out” be revived to describe the impact of federal deficits?😳

    1. Potter – in my mind these folks have always been in communication on their actions – how could they not be? Apparently Japan is kind of the wild card here–lots of savers and investors there with giant government deficits–maybe they want (need) to raise rates to keep money on shore versus chasing around the globe for yield. Yes ‘crowding out’ is not something we have heard about for years, but it would seem that it could come about again at least the concept would come back as rates increase.

      1. I worked in Japan a lot back in the day. The government has tried a lot of things to get consumers to save less or to do more with their money than just put it in the bank. Not much success. every Japanese housewife dutifully puts money in the bank every payday. Its like a law of nature.

        I think it would be a good thing if we had more of that in the US, but that’s not likely to happen.

    2. I do not pretend to be an expert or the unknown consequences of such, but if Japan did allow interest rates to rise it could bust up the “carry trade”. That being the long held practice by whoever, of borrowing cheaply in YEN, then buying debt with higher yields such as US, and more.

      1. The Yen is so often an odd player in the global currency markets that makes some interesting things possible.

        I had a colleague who was working in Paris as an ex-pat from a US company. He bought a house in 2008 (IIRC) and took a mortgage in Yen from a Swiss bank. Crazy lash up, but he made out like a bandit on the currencies. He also made a bundle when he sold the house. Lot of risk for a big reward.

        I was never that brave.

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