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)