Equities are soft this morning with the S&P500 off about 1/2%. Seems global problems are contributing to the softness with a Chinese company (Evergreen) filling for bankruptcy. Investors continue to have plenty of options to sock money away in safe stuff paying a decent yield.
The 10 year treasury yield is trading at 4.22% right now which is off 8 basis points from the close yesterday–maybe we will see a little rally in income issues today–I think my accounts are off 4 or 5 days in a row–not by giant amounts but enough.
A topic that is getting lots of press is mortgage rates – obviously they are moving higher. Inventories of for sale properties continues to move lower – who the hell wants to trade in a 3% mortgage for a 7 or 7.5%? We are back to the ‘haves’ versus ‘have nots’. The wealthier folks can do anything they please–they are paying cash and they are the ones most active in the market – and honestly the prices they are paying are in many times ridiculous, but it is the market. The area I think is due to be pummeled is the apartment construction area – just too much activity and there is no way at ever rising interest rates that these make sense. I am guessing there are some small community banks that are getting themselves in trouble with these loans, but these issues take years to play out so immediately we won’t see it play out, but these loans will come home to roost.
Today I am looking at an addition to my Affiliated Managers Group 5.875% baby bond (MGR). This one has caused me the most pain this week and is now trading at $21.32 it is sporting almost a 6.9% current yield. This is a very attractive price for a investment grade asset manager–highly likely I will buy more today unless it bounces strongly at the open. My current holdings have an average price of $22.82 so I will get that dropped down a bit.
No real economic releases on the schedule for today.