Wow–Stocks are Hated. Income Issues Hang Tough

So we were looking for stability in the interest rate area yesterday and we got it as the 10 year treasury is unchanged today.  Of course with the DJIA average down 400 right now you would expect interest rates to drop a bit.

Yesterday we personally saw good recovery from the small losses we incurred last week–in fact we are about even and are more than happy about that.

This afternoon we have a fairly large 10 year treasury auction which will be interesting – we will see what the demand is for the paper.  We think this is one of the most important numbers for now.  The marketplace is acting like buyers will demand higher rates yet so we will see if this starts a new round of selling in income issues.  Normally after a larger spike in rates like we have seen in the last week or two we would see a few weeks of ‘backing and filling’ in rates–if rates were to now move higher by more than a few basis points we would be concerned that we could spark a ‘tantrum’.

We have to head out of the office for a few hours so we will miss the fun, but needless to say if you have been doing any selling today or yesterday it would be good to build a bit of dry powder–given the money market rates now being over 2% holding a little extra cash isn’t quite as painful as it has been in recent years.

 

 

8 thoughts on “Wow–Stocks are Hated. Income Issues Hang Tough”

  1. Find myself checking the new list “$25 Preferred Stock Sorted by Share Price Loss/Gain” under the Preferreds tab almost daily to gauge that sector.. what a great tool.. supplements my preferred/baby bond watch list ..

    As you said on the kickoff Tim, there is not enough yield yet for me either to get in as a material adjustment in inflation expectations and rates appears to be underway.. 2% in cash is better than a 10% or more loss in principal (we have already seen that in some issues!) I do not want to lose principal..several folks here seem ok w that. no thanx for me..

    don’t fight the FED for sure.. runoff in bal sheet plus 3-4 increases thru 12/2019 in FED Funds rate is a headwind for fixed income..3m LIBOR is ticking up daily .. low end wage inflation is very high, labor shortages rampant for low paying but essential jobs..utility costs rising (at least mine are ) to cover elec/water/sewage/ng capex repairs.. higher gasoline prices, shrinkflation in consumer goods (that 1lb box is now 12-14oz etc)

    massive Treasury borrowing plus higher rates available abroad competing for yield mean tepid demand coming imo for our auctions.. no wonder there has been a rash of corp issuance lately.. maybe their last chance for a while to grab a good debt/pfd rate..

    watching levered income CEF’s where if this continues the best values often appear -as well as a few pfd’s like Urstadt Biddle and Hoegh LP.

    1. Libor, oddly enough is only a few basis points higher now than it was 6 months ago. It really get way ahead of the curve early last spring and hasnt moved like the treasuries the past few months. Its an odd creature, maybe that is why so many want to get rid of it, lol.

  2. Hi Bea–thanks for your astute comments. I am like you–I hate to lose capital–Larry M would argue ‘who cares’ as long as the income flows. I have always been sensitive to net asset value loss–don’t know why. Now if I could lock in a safe 7-8% forever I might be fine with a little capital loss–but at 5.5% I am sensitive.

    1. Nice call on the rates Tim. According to CNBC, the auction was 3.225% right around where you predicted stabilization. Naturally with the large stock sell off, the rates fell at the close.

      1. Actually in thinking about it a little more, the bonds falling off also are unusual. Usually, the large market sell off has a “flight to safety”. Should be interesting tomorrow

  3. Precious little green on the screen today but what little there was were Pfds and BBs. MH-A, of note, was down 3% on the day and now 23% on the year. The BUTC (back up the truck) boys will be all over this one!

  4. I flipped NGHCO and GLIBP yesterday after buying on Monday and bought both back today, and bought ALLY-A and PSA-Y today, both showing good resilience to the market gyrations. Also bought CHY today and F yesterday but sold F an hour later when it broke $9 to the downside. Another day like today and and we may see some real panic in our space, but so far no real panic at least for the ones I watch closely, and in fact they seem to be in stronger hands today than they were on Monday as any movement at low-ball prices was on tiny volume.

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