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Modest Damage From Rising Interest Rates

I was surprised and pleased that the jump in interest rates did very little damage to our investment accounts–although account balances are distorted by the fairly large influx of interest payments on CDs (balances rise with interest payments while they fall back a bit with share price losses). The large allocation to CDs certainly kept the damage minimal–so the question is whether rates are done moving higher or not. Obviously no one knows — I question whether we have seen a peak in rates–will markets tire of financing the deficit spending of the U.S.?

Yesterday I was hunting ‘bargains’ (we all define bargains differently) and found a few possibilities which I might buy today. I am mainly watching the short maturity term preferreds and baby bonds—as most of us know issues that mature in a couple years generally don’t move much in share price—many times they trade at $25 plus accrued dividends or interest. I will list those bargains I buy – they are thinly traded so I may not be able to get them at my price–we’ll see. The list of term preferred and short maturity baby bonds is here.

Right now interest rates are about flat with yesterdays close with the 10 year treasury at 4.37%. We will have employment numbers for the next 3 days and these should set the tone for interest rate movements. I have stated it is my belief that the Fed really wants to see soft employment for a number of months as a reason to lower Fed Funds–and generally employment has held up well. Yesterday we had JOLTs (job openings and labor turnover) announced and with 8.8 million job openings there is no reason to believe that employment numbers should falter yet–we’ll see.

Equities are real quiet now after a couple rough days–awaiting news. Let’s get going!!

8 thoughts on “Modest Damage From Rising Interest Rates”

  1. Been adding to PRIF-D, not really a short term maturity – 2029 – but seems the best of the PRIF term preferreds.

  2. It was a good time to take profits on income issues the last month or so. The market may be presenting a new opportunity to buy certain income issues again.

    I’m in the camp that things are going to get wild so I took income issues profits and bought metals and energy which is paying off while market wants to put pressure on Treasury and Fed.

    1. Yes, had 400 shares of SACH-A. was able to get out a few weeks ago at 24.84. Its now about $1.25 lower.

  3. For someone trying to invest for income, higher interest rates should be great, at least while you have cash to invest.

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