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Powell As Expected

The rate hike/no hike announcement yesterday was exactly as I expected – no hike, but tough talk on the future. Anyone who expected anything but what we got simply hasn’t been paying attention. Inflation, while much tamer than a year ago ticked higher last month–and may well be high again this month. GDP is forecast to be in growth mode for the year and employment remains relatively strong.

The 10 year treasury was steady after the no hike announcement–BUT this morning after time to reflect on the announcement further is interest rates are on the move higher–now at 4.46%, up 10 basis points from yesterdays close. Remember that as income investors interest rate movements higher don’t necessarily hurt us immediately–it is more the speed of the move than the direction. I like to see moves of 2-5 basis points–10 is too fast–I hope it backs off a bit during the day or we will have some pain in preferreds and baby bonds.

This morning we get the 1st time jobless claims–forecast at 225,000–we need to see this number rise–Jay Powell needs to see the employment numbers rise. Additionally we need to have the leading economic indicator remain soft–I haven’t looked over the construction of this indicator–maybe it is a meaningless stat at this point in time. The number has shown contraction for 16 consecutive months–seems out of step with reality.

Carecloud (CCLD) released a operations update yesterday in response to the shellacking their preferred shares took on Tuesday. The preferreds bounced back nicely but only a fraction of the fall they took on Tuesday. Not something I would ever be involved in – I am way too conservative for involvement.

Yesterday I bought 4 shares (yes 4) of the RiverNorth Doubleline perpetual preferred (OPP-B)–this came from a good til cancelled buy order. I though I had my gtc order set at a lower level–obviously not, I will move it 25 cents lower today as I want better bargains than the one I got on 4 shares yesterday.

This morning I see JPMorgan has a 5.70% 1 year callable CD available (on Fido)–with interest rates popping we may have very tempting CD’s and treasuries out there–is 6% in out future?

25 thoughts on “Powell As Expected”

  1. Just curious guys does Schwab or TD ameritrade allow you to buy brokerage cd’s without talking to a rep. My brokerage desk requires you talk to a trader which is a pain in the butt. Thanks in advance

  2. Just grabbed- at Schwab- 1mo CD from Connectone Bank: 5.6% = 5.746% APY Not much less all the way thru 18 mo. (5.5%) I don’t get the 11 day lag to start it (settlement date 10/2, pays 11/1)– guess they get the money right away?
    Not going in large since it looks like they are climbing again. Plus SGOV has a 30 day SEC yld of 5.32% now (most of my cash stockpile is in it)

  3. Tim,

    I mentioned before that I locked in 10 year CDs at BMO Harris for 6% last week. Maybe we will get there on the short end of the curve sooner than later.

  4. I have converted many positions to Fixed to Float pfds, treasuries, and MM’s. I don’t want rates to hit 6% and me not have things rolling over.

  5. ” I hope it backs off a bit during the day or will have some pain in preferreds and baby bonds.”
    In spades today- a sea of red.

    1. Gary–everything I have is red–although total portfolio is not bad because of the heavy allocation to CD’s

      1. Tim;
        Same here with exception of the lowest dividend rate payer I have, Entergy Texas, Inc. 5.375% PFD Callable (ETI-R). It’s + .20 a share, can’t figure that one out. JXN-A up .13, other than that pretty dismal day. Later today the bond/CD part of my portfolio which is about 75% of it will probably take a hit as well, but I keep them until they mature, so none event to me.

        1. Bill S–Yes my t-bills and cds will show losses but those are minor since they are so short term.

  6. From the WSJ this morning…
    rates might be higher not just for longer, but forever

    “On Wednesday, Federal Reserve officials surprised markets by signaling interest rates won’t fall as much as previously planned.

    The tweak might be more important than it looks. In their projections and commentary, some officials hint that rates might be higher not just for longer, but forever. In more technical terms, the so-called neutral rate, which keeps inflation and unemployment stable over time, has risen.:

  7. TD also has that JPM 5.7% 1-Year CD. Best monthly pay I could find was Medallion Bank 5.5% 2-Year

  8. Long end of the yield curve moving up strong this morning.

    Troubles with WP Carey this morning, liquidating / spinoff their office portfolio. Reminds me of that scene in the “big short” movie where they are on the phones frantically dumping things before the bottom fell completely out.

    Was it Bank of the ozarks (OZKAP) that was funding all the new office construction?

    1. Eladio–if I remember right this is one of Brad Thomas’s favorite SWAN pics–ouch.

      On 9/14 he wrote ‘best time in 4 years to buy this aristocrat’

  9. I didn’t hear the whole Fed event but what I did hear avoided the “third rail” of fiscal policy. It looks to me like fiscal policy is offsetting much of the impact of tightening monetary policy. I also note that the rate increases in the outer maturities seem to be driven by increasing real rates. Increasing real rates would be consistent with a gradual crowding out effect of huge fiscal deficits. None of this gets any mention from Powell?

    1. Powell mentioned real rates several times if I recall correctly. I was listening to bloomberg while driving. What he does not really do is criticize congress/president.

  10. Looking at the MBS TBA tab on Schwab, I see the Fannie Mae October 6% coupon offered at $100.1

    Assuming the current rate structure remains I will likely pull the trigger on these bonds as a replacement for my MS-E after the next Fed mtg – which should see a 25 bps hike.

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