You all know already that the December jobs number came in way hot–I was fearful of that occurring. With an expectation of 155,000 new jobs markets are not taking kindly to 256,000 new jobs. Of course on one hand it is good news–lots of folks should be employed which is always a good thing, but on the other hand interest rates are soaring with the 10 year treasury at 4.77% after trading as high as 4.79% just a bit ago.
For holders of income securities we will see some pain today–but looking at the bright side of things we may be able to maintain short term interest rates at current levels–or even a bit higher, which should bring us continued ‘decent’ rates on money market funds–and maybe CDs.
It is getting closer to a time to do some bargain hunting in perpetual preferreds–I don’t think the time is here–but it is closer. The strong economy and government debt demands are going to keep moving interest rates somewhat higher, but where that exact peak is isn’t known of course. One is going to have to ‘leg in’ to buy some bargains.
I have actually been investing with a 4.50-5.00% 10Y in mind. It’s funny how we forget the old days of 5% Passbook Savings accounts! Things can be just fine with a 4-5% 10Y I think – pain happens if it goes too much higher than that. My only move today was taking some cash and buying the new ARCC 5.8% coupon 2032 bond (S&P BBB). Got it for 98.01 some something akin to 6.13% YTM.
I am skeptical about the employment numbers. I am waiting to see how much it gets revised down next month.
Not to get political, but we have seen jobs data come out time after time from the current administration that are later revised way down. It wouldn’t surprise me if this is the “last hurrah” to give the outgoing party the ability to claim as we go into the next election cycle that they had “big job numbers at the end of our administration”.
That doesn’t mean the stock market won’t react to these numbers, but it doesn’t make them reliable…
Agree. Do we really think this is a “double top” in 10Y yields or is more pain ahead Our politically driven FED threw gas on the fire by cutting rates before the election. What is really driving long term yields up is lack of confidence we can manage our way out of this mess. A new high in 10Y yields, maybe a scary one, is the only thing that’s going to get this government to do the right thing. That is when we will find bargains in fixed income.
There are 2 yr 4.75% JP Morgan Chase CDs listed at E-Trade. Don’t have to think too much about those.
I bet that this CD is callable….better check
It is, but its not really a concern as I don’t mind flipping every 6 months. No real risk we are seeing lower rates anytime soon.
Unless inflation spikes to 8% again…
For almost nearly coming back to where we were in 2023, I haven’t seen the screaming hot deals yet.
5Yr Tsy flashback … Oct / Nov 2023 = 4.85% + –
……………………….. Apr / May 2024 = 4.70% + –
Jan 10 2025 ( 10am EST ) ….. = 4.55%
legend.vs—many (most) of the perpetuals I was selling a few months ago are down at least 4% and some 10%—before today. Maybe not the best bargains we are going to see, but certainly much better. My ‘relative’ values show preferreds and baby bonds to still be overvalued compared to late 2023.