Quiet–very quiet, is a good way to describe the last couple of weeks of income security trading. With the 10 year treasury trading in a range of 2.63% to 2.70% last week it is obvious with a glance that there hasn’t been market moving data being released.
The DJIA traded in a range of traded in a narrow range of 25,762 to 26,053 before closing at 26,032–just like interest rates, the trading reflected the lack of information that the market deemed important. The only news (or at least speculation) was progress on the China trade front.
On Sunday (today as we write) President Trump announced a delay on any further tariffs on Chinese goods, which had been scheduled to increase on 3/1, as good progress is being made on the Chinese trade front. This likely will help stocks a bit early Monday, but since it was expected euphoria could fade fast.
The average preferred stock was up another dime to $24.40 while we see there are 215 $25 issues trading at $25 or below virtually unchanged from last weeks 216 issues.
Last week we posited the question of whether the FED had already started slowing the balance sheet run off as the previous 4 weeks showed a runoff of only $19 billion. Last week the question was likely answered as the runoff was a massive $47 billion which gives us a 5 week running total of $66 billion which actually is the largest 5 week runoff that has occurred.
Last weeks economic data releases continued distorted by the previous government shutdown. We had durable goods orders come in soft compared to forecast for December. The Philly Fed Index came in very soft at -4.1 as compared to 17 the month before and the 1st negative reading since 5/2016. The manufacturing Purchasing Managers Index-came in soft while the services Purchasing Managers Index came in a tad firmer last month. Existing home sales were softer than anticipated as the housing market continues in a tepid fashion. Leading indicators were released and it showed softness–but not certain why they bothered to release it as 3 of 10 components were missing due to the partial government shutdown.
All in all we would say the economy is far from overheating at this point in time and would think it would bode well to hold interest rates at current levels–certainly no chance of another interest rate hike by the FED in the next few months.
The economic calendar for the coming week is the largest schedule we have seen–maybe ever. Of course any number of the releases could again be delayed.
Key to the week will be testimony to congress from Fed Chair Powell on Tuesday and Wednesday.
Tuesday we have building permits, housing starts and the Case Shiller home price index. We also have what to us is ultra important and that is consumer confidence (of course everyone else yawns).
Wednesday we have pending home sales as well as factory orders.
Thursday we have the 1st and 2nd estimates of Q4 GDP–we have average forecast in the 2% area–BUT GDP Now from the Atlanta Fed has a forecast of 1.4% so we have a wide range of forecasts and they could be market moving. We also have the Chicago PMI on Thursday and Fed Chair Powell will be testifying before congress.
Then on Friday we personal income, consumer spending, core inflation, ISM manufacturing index, consumer sentiment, and motor vehicle sales.
So we have bunches and bunches of opportunities for traders to find an excuse to move markets in a violent manner–but who knows if anyone will get excited about the data this week or if we will see more shrugging of shoulders.
Last week we saw the new CMS Energy 5.875% baby bonds with a 2079 maturity begin to trade under ticker CMSD closing the week at $25.10.
CEF Priority Income Fund finally got their new term preferred launched with a coupon of 6.625% with a mandatory redemption date in 2024. The issue has a permanent ticker of PRIF-C, but is now trading under the OTC Grey Market PRNCP and last traded hands at $24.75.
Stifel Financial sold a new fixed rate preferred issue last week with a stingy coupon of 6.25%. For a non investment grade issue which is non cumulative and perpetual this seems kind of low. The issue is now trading on the OTC Grey market under temporary ticker SFEIP. Last trading was around $25.20.