Fed policy change on inflation
If you haven't already heard the news, go read up on what Powell said today regarding the Fed's change regarding how they will approach inflation.
The upshot is that we should prepare for a long period of low interest rates.
Now, with that being said, treasuries continued moving higher, as they have the past few days. This doesn't make too much sense, in that if interest rates will be (guaranteed to be) kept at/near zero, then there's no reason for yields to move higher. The only logic which comes to mind is that ultimately the Fed will create the inflation it wants, overshoot the target rate (as indicated in today's announcement), and ultimately that will mean the Fed will then raise rates to combat it. However, that is way, way, way down the road. For the time being, it doesn't make much sense for treasury yields to move higher. However, at this time, everything the Fed has tried to induce inflation has failed. So, again, it's questionable why treasury yields have begun to move higher.
Notwithstanding, I will not look a gift horse in the mouth. I did notice today for the first time in a while that some muni prices moved lower (yields higher) - not a lot, but I did notice some weakness in prices which I have not seen in a while.
I received a couple of calls today for October 1 and one for July next year (just defeased today). I purchased some insured 6.6% 2041 San Jose, CA Airport bonds early this morning. Last month they said they have two years worth of cash burn on hand. Additionally, it is a high coupon, so the likelihood is that it will be called in March. There is also a non-insured version of this bond which has popped up the past couple weeks for about the same price. If the price is the same, then I'll take the insured over the non-insured. I already had some of these, so when more popped up today, I didn't need to do any research as I was already familiar with the specifics of them.
I have not found many bargains lately, so I have continued taking those which offer some positive yield with a short-term call date. One that I took this morning was 6.45% 2035 AAA-rated Dallas, TX GO school bonds. Call date is February with YTC of 0.05% - essentially nothing, but still better than the 0.01% I'd get for sitting in cash, and the potential they don't call and I get a higher yield after the call date.
Anything halfway decent that pops up and has a coupon of 5% or higher should be grabbed if it has a positive yield to call in the next year or two. I believe these are extremely safe as there is very high likelihood they will be called. Everyone is going to be looking to refinance at the rock-bottom rates currently available.
