I saw the 10 year treasury yield crossing at 4.38% this morning–which is off just a little from the close yesterday, but 24 basis points lower than a week ago. The ISM Manufacturing Index came in soft yesterday compared to forecast. Of course in contrasting data the S&P ‘flash’ manufacturing PMI came in hotter than forecast just 15 minutes before the ISM data release. For now attitudes have changed–bad news is bad news and the talk of Fed rate cuts is ramping up again. You need to go back 2 months to find lower interest rates–is 4.20% the lower bounds? Of course no one knows–we’ll see where the data takes us–in particular the ADP employment report on Wednesday and the ‘official’ employment report on Friday.
Tied right in with falling rates is the hard tumbling WTI crude oil. WTI was knocking on the door of $80/barrel a week ago and now it is down around $73–and who doesn’t like lower energy prices?
So with tumbling rates are preferreds and baby bonds moving sharply higher? NO!! Right now they have moved just a little higher while falling equity prices are serving to hold down any gains. As I have mentioned before while income issue prices move with the ‘macro” interest rate trend–on a ‘micro’ (daily) basis prices do not always move in tandem with rates–BUT over the course of a given month prices will move in unison. Maybe we will get a sharper upside reaction in prices today (or tomorrow or next week)–not getting excited on day to day moves.
Today we get a couple more pieces of economic data in the ‘factory orders’ report for April and the JOLTS report (job openings and labor turnover)–both are forecast to be softening just a bit. These number are coming at 9 a.m. (central) so we will see how markets react if numbers are off target.
No action for me today–NADA–just sit back and watch.
10yr T bills jumped this morning. Unemployment inched up to 4% but new jobs came in at 274,000 kinda mixed news
There has been a lot of discussion on CD’s with an emphasis on whether they will be called or not. We have a little data on this, particularly with JP Morgan- Chase CDs. Looking at callable, original mature date 9/1/23 or later, here is what we have seen to date, over a total sample of 99 different CUSIPS.
Total # Cusips, # called Cusips, % called, Min coupon, Max coupon
61 0 0% 0.5% 5.35%
12 9 75% 5.4% 5.5%
13 13 100% 5.55% 5.6%
13 9 69% 5.65% 5.75%
Bottom line to me is that any JPM CD with a coupon of >= 5.4% has a high probability of being called. Obviously if short to medium interest rates fall, the odds of being called go up. Opposite is true if interest rates increase.
We buy lots of them under par including commissions with the assumption they will be called. If they are NOT called on the first call date, we pick up a few extra pennies.
Anyone else feel like something is a little off? Seems like liquidity is drying up and the market is getting exhausted… Interesting with the plunge in rates that I could still get a 6 mo CD today for 5.4%.
Anyone have thoughts on TELZ – today’s news?
Those of us who had a position in TELZ in the past have probably sold it off taking a hit. They failed to accomplish their goals and most of their talk was hot air. While I tend to glance at the news blurbs surrounding TELL I gave up thinking it was even 50% accurate. Investing in the company is probably not a good idea for the little guy. The big boys will swoop in and make sure nothing is left over for the common shareholders. Baby bond holders will be very lucky to even get their money back at maturity let alone get paid the whole time.
So to summarize.. what is actually real versus rumor with that company? Who the heck knows. Speculative to the extreme considering they are desperate now days.
I’m becoming a schizophrenic investor. One day I read story after story of mushrooming deficits and I’m focused on investing for the inevitable rise in long term rates (sell perpetuals, low yielders, park funds in MM). The next day the ten year takes a nose dive and I’m back to looking for high quality preferreds. I seem to have no game plan anymore. If Grid starts an ETF based on his sports betting that’s probably where I’d put all my chips…
Well, I only grinded out a split last round. But still netted $500 by selling Stars ticket down 3-2 series for 30 cents on the dollar thinking they were toast. Panthers in Finals, and maybe a few bets on both golf Opens, then its wait until football. Loving me some Iowa Hawkeyes 7.5 over again this year and likely the LA Rams 8.5 over.
Anywhose, I trade a little fixed perps, and burrowed as far into CDs as I can until maturities kick up again. Just basically staying lower key this year as planned, which means unfortunately lower returns this year as planned too.
Tumbling economy means increased default risk. Prices more likely to down despite lower rates.
Martin I have a tendency to agree with you. Companies with low credit quality borrowing at higher rates from BDC’s but even if rates go down they are still up the crick without a paddle as economy slows their sales go down making it even harder to service their debt.
All the futures are in the red. Cancelled 1 GTC and moved one down.
And brokered bank CDs I have seen this morning skyrocket.
Wells Fargo 1 yr CD 5.4% not callable
Wells Fargo 2 yr CD 5.1% pays monthly not callable
JP Morgan Chase 1 yr stretching to 5.5% with 6 month call
Interesting….
TLT has good technical setup, but if it can’t bust thru the lower 90’s with passion then we still may see a lower low.
Everytime someone mentions a JPM 5.50% CD I never seem to find it… I don’t see one at Fido or Schwab now
@2WR JPM CD 5.50% 1 yr 6mo call
I don’t see it either at FIDO.
I do see….
Regions Bank
11.07.24
5.45% @ mat
7 min
759187GN1
2WR, would be wild if you found it, JPM just called my 5.5% CD (was due to mature in Sept)
Try cusip 46657VBH2
Thx Jerry, found it. Apparently not available for purchase so says Schwab. Pretty wild they have that out there but they called my 5.5% due in Sept.
Schwab seems to have a limited number of CDs. I bought 5.35% monthly pay today, 9 months, first Carolina bank. Actual start day 6-14 which sucks, but trying to keep a ladder intact – they keep getting called.
Also sold CHSCM and CHSCN today, ex- div in 9 days but trading way more than one dividend over par, will look to reenter at some point.