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Slowwww Down

The 10 year treasury yield has taken a pretty good jump the last week–trading as high as 3.30% earlier today (now at 3.27%).

The move higher has meant the 10 year has jumped almost 50 basis points higher in the last 2-3 weeks. I feel fortunate to have only given back 1% of portfolio NAV during this move.

Many times we have discussed that markets can handle higher rates, but at slowly moving pace—let’s slow down–speed kills (at least hurts the portfolio).

Rates are now adjusting to what is believed to be higher signaling from Powell–I would suspect that they will flatten out here shortly, although with full blown quantitative tightening set to start this month we could see this factor alone send rates higher yet (so in other words rates could be flat to down–or they could shoot higher).

It is a good time to add a little to those ‘buys’ you may have missed out on a few months ago, although prices are not at those low levels currently–they remain favorable for long term investors.

6 thoughts on “Slowwww Down”

  1. QT is more significant than moving rates around. The money supply has a direct effect on inflation and economic downturn. Rate hikes have an indirect effect and won’t work long term if we keep expanding the money supply. I’d expect a legitimate bout of QT to fully ignite the recession.
    The Fed typically doesnt react until after they see results. Since there is a time lag in economic policy that means they are always late to act. Started hiking and tightening too late and they’ll probably stop hiking and tightening too late also. Whipsaw economy.

    1. Will we get another “tantrum” from the Fed cutting QA ? If so, hold on to your Mr. Toad’s Wild Ride. It will be a doozy!

  2. It does seem like the market has a handle on rising rates but not QT and it’s doubling which should take place pretty soon. I guess fancy pants smart people are now trying to calculate how that will play into things. QT taking place at an increased rate has a similar but not exactly linear type of reaction as rising rates. So that is what they are trying to figure out. Reduce by 1 trillion, 2 trillion, etc.. and market reaction over a certain time period if it accelerates more.

    As for buying.. just due to being plain busy I just reinvest current cash flow. I have not thrown any large lump sums into the mix yet which is turning out to be somewhat wise with prices going every which way. I still get the feeling another shoe will drop. I am ready I suppose. I just need a few days to prep things if it happens.

  3. “so in other words rates could be flat to down–or they could shoot higher”
    Tim—so what’s a guy to do? I’m just entering buy orders of perpetual IG issues (BBB-, BBB, BBB+) at various lower prices and waiting to get occasional fills. If I don’t get filled, so be it. If I get filled, I can live with 6.25-6.75% yields even if rates go higher. Sooner or later, IMHO, the Fed will cave if the economy collapses.

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