We go through this every time there is a FOMC meeting–markets kind of tread water just waiting to hear what we mostly already know. Then we can dissect every word that Jay Powell speaks and come to a conclusion (and we all come up with different conclusions).
Today I believe there will be no change in interest rates (the Fed Funds) simply because employment is holding up and because most of the Fed folks believe that tariffs are highly likely inflationary and we will see the effects of them starting right now.
While everyone is sitting around speculating on the Fed I made a buy this morning. I added to my position in the WR Berkley 5.70% baby bonds (WRB-E)–I already had a position (modest in size). WRB is a super safe and very well run insurance company and while I tend not to buy baby bonds with maturities way out in the future (in this case 2058) the combination of safety and a dent 6.53% current yield makes it a good long term hold–with a chance of capital gains in the months ahead.
I continue to have cash available to move ever so slowly into solid (in my mind) shares with yields above 6% or so to move my overall portfolio yield higher.
Tim. The bond market is now going, up and down, with equity market ,but still plenty of bargains..Georges
No rate change- and down we go….
JPM-L: safety tim plus 6% yield and upside to 25 par potential in the future
Many years ago, there was a radio host in the city I grew up in with the same name. Jim Nazium. I am not sure if it was spelled the same, but certainly pronounced the same.
I own it and can’t believe how below $25 some of these are. The big banks have many of them. Jpm-K too.
JPM-L 6% yield is not that ‘safe’! IMHO – The price and yield will likely decline as rates fall and given the low 4.625% coupon it may not be called for a while.
If you like JPM as being safe TBTF bank you may do better with JPM-C or JPM-D with higher coupons though with little price appreciation
Tell me how the price and yield will likely both decline as rates fall………that’s quite a feat.
2WR, you keep everyone honest – I’m not sure anything gets by you! 😄
While I enjoy seeing the price declines for those higher yields 😉, I’ve been steadily building positions in investment-grade low coupons these past few weeks. Sure, nobody can call the bottom, but grabbing these $5-$10 under par seems like a solid place to park cash. I’ll just sit back and let those dividend checks roll in untouched for at least a decade. 💪
I bought a lot of the JPM/C at slightly above 6%. I am happy to just sit on this and collect my money for the foreseeable future.
Tim why not go with the WRB-G 4.25% issue? Current yield about the same. But should be more capital gains if rates fall. I’m fairly new so if you could walk me through the comparison that would be helpful for me. Thanks!
FWIW-
The E & F should be called before G- plus, unless rates really crater, they have no pressing reason to call ( if they wanted to replace them). Looks like F might be paying more than G.
Just my view
pinkyringcapital–honestly I didn’t look further than the ‘E’ issue which I have owned for a long time. Part of the reason I hold the E issue is because with the 5.70% coupon there is an outside chance that the issue could be called in the next year (or some time frame)–certainly WRB could call it if they would like to. On the other hand you are correct that the G issues would have more upside if interest rates fell sharply. The E issue will never trade much above $25 in the future because of call risk which would be a vote for the G issue and incremental capital gains. You will find here that when it comes to one issue versus another there are multiple correct answers and yours would be as good as another. When the time comes for more ‘adds’ I will consider the G or even the H issue.
Tim thanks! That makes sense. For long dated issues like these is the 30yr UST the interest rate to watch?