The data coming out over the past weeks have left the door open for the Fed to either stay the course or begin to taper, and I’m looking to add more high-yield paying assets that are leveraged to the gradually-recovering economy sometime this week.
The bond market isn’t overly impressed with the latest round of economic reports, otherwise yields would be bumping up against the highs of the year, and I’m more akin to believing the bond market than any rhetoric from Fed officials or forecasters.
The recent rally in the dollar would lead me to believe that tapering is not as far off, as Ben Bernanke would try to have us believe. Again, the economy can pick up enough speed to curtail quantitative easing well ahead of the Fed’s 6.5% unemployment rate mandate. This is what the market and I suspect will be the case. Even though tapering would suggest higher yields, at the same time, a rally in the currency will do much to keep yields lower.
In my pursuit of having it both ways, I want to focus on adding more convertible debt to our holdings in order to obtain senior preference in the credit structure, while also having exposure to the equity markets via built-in conversion features.
Trying to locate a convertible that rivals AGIC Convertible & Income Fund (NCV) is difficult, but I don’t mind settling for a lower yield as long as it is a good fit to our Conservative portfolio, which does not currently have a holding that is invested in the convertible market.
It’s high on my list. Stay tuned.