After nice rally’s in equities and interest rates it appears that markets will go on ‘inflation watch’—somewhat minimal movement as we wait for the all important consumer price index (CPI) to be released on Thursday. Expectations are for the core rate to be 5.7% versus 6.0% last month (both year over year). CPI is expected to be 6.5% versus 7.1% last month.
So with equities up about 1/3% this mornings and the 10 year treasury yield bouncing to the 3.57% area (up 6-7 basis points) we wait.
The fear I have (I am always worried–100% of the time) is that we get a ‘hot number’ on Thursday and with the rally we have experienced we could see a giant sized move higher in rates–maybe 20 basis points, which would certainly mean income issues get spanked.
On the other hand many of the gains seen in the last week were likely from bargain hunters after tax loss selling in December and they may be less prone to sell with interest rate movements.
In the end I am mostly ‘buy and hold’ so whatever will be will be.
Hoping for a “hot” number, I like picking up preferred shares on the cheap and holding them to get capital gains + income. Also, I have most of my agency bonds ranging from 6.0% up to 6.98%, I know they will get recalled, but the longer that can is kicked down the road the better.