Nice Rally This Week In Income Issues

As so often happens after we saw preferreds and baby bonds fall substantially in the last month (down 3-4%) we are seeing a nice rally in them this week. It is not that interest rates have moved lower, but simply that the 3-4% setback was overdone. Folks simply are now buying what they perceive to be ‘bargains’. Our accounts have risen nicely this week–but remain around 1-1.5% below all time highs–the continual stream of dividend and interest payments have been very nice in helping to offset capital losses.

Yesterday we had soft economic numbers released with the purchasing managers indexes (PMI) coming in short of expectations by small amounts–this simply continues a long stream of conflicting data. There is nothing in this data that indicates substantial softness in the overall economy. Today, in an hour, we get durable goods orders data–again not likely to be a meaningful number when taken by itself–we’ll see.

Futures markets are higher by a bit this morning–up 1/5% on the S&P500. Interest rates are flattish again at 4.64% (the 10 year treasury). We are awaiting GDP numbers on Thursday and the PCE Friday–these numbers have the potential to move interest rates into the 4.75% area if they are hot. If the numbers come in ‘soft’ we will see interest rates fall a bit–not dramatically. Numbers right on target (forecast) would be wonderful an keep income issues from tumbling.

Yesterday I bought shares in Hennessy Advisors 4.875% baby bonds (HNNAZ)–recall I had set a good til cancelled order at $23.35 a week or two ago and it executed yesterday. These are additional shares to be added to a position I already owned.