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Interesting Day Ahead as Interest Rates Crack 4%

Today is a big day for employment stats – the ‘official’ bureau of labor statistics employment report will be released in about an hour.

Yesterday ADP released their employment report–and this report which has generally been less respected than the government report showed job growth as relatively strong–certainly stronger than forecast (164,000 versus 130,000 forecast).

Today the forecast is for 170,000 jobs being created in December versus 199,000 the month before. The unemployment rate is forecast at 3.8% versus 3.7% previous.

The 10 year treasury yield cracked 4% yesterday and this morning is trading at 4.04% as doubts of March Fed Funds rate cuts are surfacing. Economic data of all sorts has shown the economy to be fairly solid – not extremely strong, but solid. There is no reason to think the 10 year yield is going above say 4.1% or 4.15%, but if it does I would expect income portfolios to take a fairly sound beating–temporary, but painful.

Today I am going to take a look at Brighthouse Financial (BHF) preferreds and baby bonds. The issues from this insurance/annuity company are trading with current yields in the 7.25% – 7.50% area–being investment grade that is a tasty yield. If my due diligence pans out a starter position of some sort may be initiated today or Monday. This would fit right in with my investment ‘plan’

Well let’s get the day rolling and see where the employment reports take us.

19 thoughts on “Interesting Day Ahead as Interest Rates Crack 4%”

  1. Hi Folks,

    Thought I would pass along a resource to those interested.

    We are all tracking interest rates and generally expecting Fed rate cuts in 2024. There are a few risks to this outlook and one of these risks is always inflation. During COVID we all saw how shipping in particular, and issues associated with supply chains in general, can impact inflation and also the economy.

    I am also sure that we are all following news associated with shipping.

    If have found an excellent resource for news on global shipping. It is a YouTube channel called “What’s Going on With Shipping?” On this channel an expert named Sal Mercogliano details global shipping news in a highly informative and digestible format. As one might imagine, he is currently heavily focused on the Red Sea and shipping routes in close proximity..

    Certainly interesting for anybody watching in the current situation, but informative for those who wish to understand how this situation might (will?) impact inflation in 2024.

    The YouTube channel can be found here:

    Sal provides lots of highly credible news and research sources in this videos as well.

    In addition to this news source, I also wanted to pass along the notion of the “Bull Whip Effect” This is a model which helps to explain how Supply Chain disruptions can propagate (and amplify) through the economy.


    So the risk here is that readily observable current shipping disruptions can have a large (and seemingly disproportionate) impact on the global economy and price level due to the “Bull Whip Effect”.

    I think I will hold on to my floating rate preferred stocks and expect my 6% and 5.5% Agency MBS bonds to not pre-pay as quickly as I had originally thought.

    My current expectation is that we will see 100 bps of cuts in 2024, but there is also a risk that the next move in interest rates could very well be an increase.


  2. No offense taken by me NTT. Nothing partisan. Tim may have a different view (in which case, I will, of course, have to denounce you).

    It is absolutely amazing how so many people in government (Congress and other high gov. positions) come in poor and leave very wealthy.

    You can speculate about how they get it (and it ain’t from their salaries), but they get it.
    Kind of makes me think the adage “them that have the money make the rules” might be backward – “them that make the rules get the money”.

    1. I have been denounced so many times (sometime rightfully and more times wrongfully), that I am immune to it.

      It is indeed amazing.

  3. Tim-
    I’ve had BHFAL and BHFAO in the recent past, but sold. Thanks for the reminder- I like the long maturity of the note (BHFAL) since the YTM clean is 7.36% – in line with the others. Might pick-up a P’fd too (BHFAO?) for the built-in price gain possibility- if they call.

    1. Gary–while they have performed marginally it is only a matter of time before ‘yield hunters’ start buying these issues.

  4. There are some notes from Brighthouse for sale as well. This was from FIDO.


  5. Remember the 1983 movie “Trading Places” with Dan Aykroyd & Eddie Murphy? Was about commodities trading and how their 2 bosses got access to the Dept of Ag’s report on the crop report on Orange juice ahead of the market so they could place bets on the futures market?
    Was mentioned on Yahoo finance someone has placed a big bet yesterday that Treasuries would move up to 4.15% today. The article speculated they were betting the employment numbers were going to be strong enough not to support the fed’s cutting rates anytime soon.
    Just another talking heads article, speculating on a bet someone noticed.
    Yes, I used the words speculate and bet.

    1. Charles,
      Whoever it was they got the strong jobs report they wanted but not the response in rates.

        1. Plus if I remember the article correctly, the trade was some sort of long options position. If so, then for as long as that position still has any time value before expiration it will certainly have increased in value even if the strike price has not yet been reached. It might have already been closed out at a profit.

      1. New,
        Not to nag and no offense intended, but Tim likes to keep his website unstained by commentary regarding the political class . . .

        1. Since I did not identify any specific individual or party (because I think all of them are in on gaming the system for themselves), I figured it was ok.

          If it is not, I apologize to anyone that took offense to what I posted.

          1. New To This, I understand what you meant. I agree both parties are guilty.
            Not offended, but I like this site for the reason we don’t bring it up.

            1. If you believe the system is being gamed by elected officials, deferring to not mentioning it is detrimental to your cause.

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