Not So Quiet After All

Well the day has been kind of exciting if you hold common stocks, although looking at the screen you wouldn’t know the DJIA was down 400 points earlier as it is even right now.

Looking at the 10 year treasury drift lower makes one think this would be a positive to income investors–but we think not.  While it is not a negative it doesn’t appear to be a positive either.  It is something we have noticed the last couple of months–that when interest rates spike higher preferreds and baby bonds fall a bit in price, BUT when rates drift back down prices of those some securities do not rise.  I think money is moving to alternative investments–i.e. short term bills such as a 6 month treasury.  They have a current yield of 2% so why would the ultra conservative investor put money in any longer dated bond.  Can you imagine investing in a 30 year treasury bond for 3.1% when you can get 2% of 6 month money?  I can’t.

In the “what the hell” department–I was just looking over a pricing supplement to a prospectus–NOW medium term is 30 years??  Guess the 3-7 years I like is Ultra Short Term.  I guess the 100 year bonds that the utilites have sold lately are ‘long term’.

 

4.05% Secured Medium-Term Notes, Series M, due May 1, 2048

PUBLIC SERVICE ELECTRIC AND GAS COMPANY (PSE&G)

 

 

6 thoughts on “Not So Quiet After All”

  1. I understand the anxiety. 30% of my retirement money is sitting in the TSP G Fund. It’s my safe position and is paying 2.875% this month. Can’t bring myself to invest it in another TSP fund or roll it over. The “can’t go down in value” feature helps me keep my sanity.

  2. Tim- just wondering if you’ve ever taken a look at some of the term CEF’s available ? Many are of short duration and trade at discounts to NAV. I’ve noticed that you’ve had in the past had a REIT or two in your portfolio’s for some zip. Any thoughts on term CEF’s.

  3. Gridbird manages the “what the hell” department. Please forward all inquiries and complaints to him. 🙂

    Tim, I think your 3-7yr window is now termed “yesterday”.

    BTW, I know you have IHIT in the model portfolio. Have you had any interest in the IHTA cousin of it?

    1. I personally will call a 2048 maturity a “life time” loan instead of medium term since I will likely be dead by then.

      1. It’s only 30 years. As soon as treasury starts issuing 100 year paper that might be considered “short” term.

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