Well overnight interest rates have taken a tumble with the 10 year treasury trading around 4.66%–this is just after it hit 4.89% on Friday with the release of the strong jobs numbers. You can choose the reason for the drop—either a rush to safety because of the war in the middle east–or dovish Fed speak–or a blend of both. It is highly likely – in my opinion – that these lower rates will not last too long – the supply of new paper and the run off at the Federal Reserve logically mean rates will be popping back up. The problem is that markets don’t always move on the obvious so one never knows whether we have had a peak in interest rates.
Yesterday with the bond markets closed we saw a bit of a bounce in our accounts – not huge, but lately any small bounce is appreciated. Today if the 10 year treasury remains in the 4.66% area I would not be surprised to see a little better bounce today, BUT we have 4 Fed yakkers today and any one of them could send markets into a tail spin. We’ll see.
It is interesting – I am still waiting for my accounts to hit all time new balances. I was looking and the peak was back in July 2021 (this includes only our 6 brokerage accounts – not our large ‘savings’ account which has a fixed 4.5% interest rate, nor our minor U-Haul Investors account which has rates from 1.5% to 5%) after which accounts tumbled until 12/2022 at which point they have take a strong bounce until now. I remain about 1.5% off the all time high (brokerage accounts only). I am wondering how many investors moved out of the market during the 2021/2022 downdraft in markets and continue to be out–typically a grind lower will cause the buy high/sell low problem that many (most?) investors have-preferring the mayonaise jar being buried in the backyard to investing.
I am so tempted to start to do some nibbling–all on issues I currently own, but in particular the baby bonds from Affiliated Managers (AMG)–for bonds of this investment grade company to be trading at current yield near 7.5% seems like a gift. Also looking at a nibble on WR Berkley (WRB) baby bonds – only a 6.5% current yield, but a very well managed insurer. All of these issues have the potential for 15% gains in the next year, although the capital gain portion is a real wild card–where will interest rates be in a year?
I like the affiliated issues, hard to see a diversified asset manager go bust. One risk is that they are heavily exposed to AQR. AQR is a quant shop and is exposed to coding risk. This is what took down AXA investment management.
For the “safe,” category, my preference remains RPT-D.
>It is trading close to $50 par price.
>Coupon is 7.25%, non-callable
>It will be backed by hard assets from a conservative equity sponsor.
The REXR issues are also solid options.
For the semi-brave, I do not think GOOD will go bust, but I think it will be rocky. If you can weather the storm, check out GOODO at 8.6% yield.
Tim-
AGM bond near 7.5% current yld ?? Looks like the highest is 6.77%
just added MGR at $20 last week
Good job—I think–only time will tell.
Good time to nibble. Impossible to call bottom.
Shareholder287—absolutely correct–I would expect 4-5 nibbles on some of these before we see a bottom, but only time will tell.