Monday Morning Kickoff (on Tuesday)

Last week was a bit of a quieter week that previous weeks with equity prices moves somewhat less violently and interest rates moving above 2.90% but were unable to close the week at the high, instead closing in the 2.88% area. Part of the reduction in pressure on the rates may have been that the FED was a net purchaser of assets by $14 billion and for the month of February. This means that the plan of reducing the balance sheet by $20 billion a month is off just a bit so far–like $35 billion for the month as the month was a net $15 increase in the first 2 weeks. We will just have to wait and see what transpires in the weeks ahead.

For the shortened week ahead there is no really important economic data to be released. On Wednesday we have the Purchasing Manager Index (PMI) being released and the Leading Indicators on Thursday and we would be shocked if anyone attached much immediate importance to these items.

Even as interest rates stabilized, more or less, preferreds and baby bonds were off 3 cents but the number of issues trading under $25/share actually was at 212 versus 223 the week before. We use these numbers only to highly any large moves in shares – more minor moves simply show that averages are just that averages.

There was just 1 new issue which began trading last and that was the Sotherly Hotels 7.25% baby bond (NASDAQ:SOHOK) which traded a measly 652 shares on Friday, of which 200 were shares we bought (more on that purchase under a separate story). Until we see some trading tomorrow (Tuesday) we are not sure of what to make of this issue, but we highly suspect that the issue is mispriced and the supply/demand will keep the price high. Really a decent baby bond with a 3 year maturity and a 101% early redemption premium should have priced in the low to mid 6’s–oh well we shall see.

This week we will be looking for a purchase in each of the 2 models portfolios. In the High Yield Model we will be considering a mortgage REIT preferred–which one we don’t know and while we will have to buy a perpetual we hope that the reward will help compensate for the risk.

We will also look for a purchase in the Short/Medium Duration Income Portfolio after adding a couple issues last week.

Stock futures are off a bit tonight–totally meaningless with the multi hundred point swings we are likely to see all through the coming week.  The 10 year treasury is trading about 1 basis point above last weeks close at 2.89%.  Key for this week will be seeing if the 10 year trades firmly above 2.90% and closes in the 2.93-2.95% are which signals we are going to stay above 2.90% with the next move set to be 3%.