As some of you may have read, or maybe I am the only one watching, the FED has announced giant sized REPO moves for the balance of the year.
I have been watching since September and the FED has done overnight repurchase agreements in the $50 to $75 billion area mostly–tossing in $15-$25 billion in 14 day repurchases agreements every 2 weeks.
Of course this is to provide liquidity to the banking system after a ‘blow out’ overnight lending rate spike of near 10% on September 15th.
Now we are 90 days later and the FED has announced they will be taking the the overnight operation to at least $150 billion. Yikes!!
I am of the thought now that this is all out on the table we will likely avert major issue—BUTthere isa chance of a misstep–in particular in light of the fact that no one really seems to fully understand the market workings (certainly I don’t under stand it).
The point being is that we could see disruptions in the next 3 weeks–through the end of the year and no one should be surprised it something “breaks”.
Giant REIT Colony Capital (CLNY) has redeemed 2 of their high yield perpetual preferreds.
A number of folks have discussed this a bit on the Reader Initiated Alerts page. Barbara posted this redemption at 7:16 this morning and other have chimed in.
The issues called (for Jan 10th) are the CLNY-E 8.75% issue and the CLNY-B 8.25% issue.
In addition to these issues there remains 4 outstanding perpetual preferreds that popped just a bit (1%) on the redemption news.
These 4 issues are all trading below $25 and have coupons ranging from 7.125% to 7.50%. Only the CLNY-G 7.50% is currently redeemable
Given the lack of yield in the market maybe some investors with a bit of risk appetite should look at these 4 issues?
Colony Capital has been a poorly run REIT and has been through trying times–their common stock trades at $4.xx, but recently they are coming under pressure to right the ship and with over $22 billion in assets (a total of $53 billion under management) you can be certain there is plenty of room for improvement. They have just sold a $5 billion portfolio of industrial properties to Blackstone so they are moving to get the house in order.
It is always disappointing to me to see the silliness of the marketplace in reaction to potential deals–such as trade deals.
We don’t do politics, at all, on the website, but for once I would like to see both stocks and bonds trade on fundamentals.
We have so-called ‘trade deals’ which move the markets and we have a FED that is being controlled by short term market movements. Then we have algorithms moving the market based on whatever key words are in the news
Early this morning we had a quiet market–both interest rates and stocks were off just a bit–nice and quiet just like we prefer. Then a tweet and a meeting at the Whitehouse on China sends market sharply higher. Stocks up 1% and interest rates up 7 basis points (9 basis points higher from earlier levels) on the day.
Now in the end it doesn’t matter too much to me–holding what I hold there isn’t much movement, but I do worry about movements in markets getting out of control–irrational exuberance–as these things eventually (who knows when) come home to roost with movements in the opposite direction.
Oh well I guess I should get used to it–it certainly seems like the new norm.
It is most interesting that since the FED claimed they are on hold until we see inflation news, markets are not paying too much attention at all to them.
They began meeting today and tomorrow they will make an announcement on the Fed Funds Rate–certainly any change, in any direction, would be one heck of a surprise to everyone.
Just watching the 10 year treasury–while no one is talking much on the meeting it is certain the bond traders are waiting for the official ‘news’–which will be no news.
The 10 year treasury opened the week at 1.83% and hasn’t moved more than 2 basis points in either direction in 2 days–that is pretty unusual.
Personally I have barely peaked at the personal accounts–although moments ago I looked for the 1st time today and there is some upward creep–I’m talking a few cents–maybe a dime in an issue or two and as always I am just fine with quiet markets–certainly excitement of some sort will come before the month is out.
Gabelli Equity Trust (GAB) has announced the sale of a new issue of perpetual preferred stock.
The CEF had already announced the redemption of the GAB-D 5.875% issue for 12/26/2019. With the new issue the company will have 4 issues outstanding–none of which have coupons above 5.45% and this one is not redeemable until 2021.
Of course being a CEF and needing to have at least 200% asset coverage ratio this will be a high quality issue.
When we could last accurately calculate the leverage GAB was at 465% (6/30/2019). Being that their assets are level 1 (directly observable prices–i.e. common stocks) investors should feel fairly secure here.
The issue will likely be unrated–they were last rated by Moodys at A1, but now they are unrated. I will need to update lists etc for this change (as well as check other Gabelli CEFs).
The issue is being called 1/15/2020 which is the next dividend payment date (Allstate preferreds can only be redeemed on a dividend payment date).
It is always amazing that even after the company signaled that they might redeem the ALL-A issue investors kept trading the shares with little caution as it had closed last week right at about $26. Yesterday it fell to $25.77. Only 2 months ago it traded around $26.70.
It is fine to own some potential call candidates, I certainly do, but giving away 1-2% or even more, at this stage is probably a bit silly–I mean ALL sold their last preferred issue with a 4.75% coupon.
WR Berkley (WRB) has announced an offering of baby bonds.
The bonds will have a maturity in 2059 with an early call period starting in 2024.
WRB has a number of other baby bonds outstanding–1 of which carries a 5.625% coupon and is now callable (WRB-B)--it can be seen here.
The company has not announced a call on the above issue–the ‘use of proceeds’ statement on the new issue says ‘to be used for general corporate purposes’, but I believe they will call the WRB-B issue for 1/31/2020.
Disclosure–I hold the WRB-B issue. It is trading at $25.28 –right about where it should be with accrued interest (assuming about a 30 day notice). If I am right on predicted call date it has 7 cents worth of potential ;eft.
The S&P500 moved in a range of 3070 to 3150 before closing the week at 3146–a gain of almost 2%.
The 10 year treasury moved in a range of 1.73% to 1.86% and closed the week at 1.84%.
The Fed Balance Sheet moved higher with $13 billion added to holdings. The previous week was $22 billion higher (just released also because of the holiday). This is a 2 weeks addition of $35 billion to the balance sheet.
There were a number of new issues announced last week.
SVB Financial (SIVB) announced a new preferred stock offering. It is now trading on the OTC Grey Market and last priced at $25.16.
Customers Bancorp (CUBI) announced a new fixed rate debt issue with a coupon of 5.375%. This issue is not yet trading and the ticker is not know as of yet.
Ford Motor Company (F) announced a new baby bond with a fixed rate coupon of 6.00%. The issue is not yet trading, but some folks have been able to buy through their brokers on the bond desk.
AT&T (T) announced and priced a new perpetual preferred stock with a fixed rate coupon of 5.00%. The issue is now trading on the OTC Grey market and last priced at $24.92.
Lastly, very late Friday non traded REIT Healthcare Trust Inc. announced pricing of a new perpetual preferred at a tasty 7.375%. The issue has not traded (that we could see), but should do so today (Monday) under OTC ticker HLTCP.
Untraded healthcare REIT Healthcare Trust Inc. priced their previously announced perpetual preferred late Friday.
The issue priced at a fixed rate coupon of 7.375% and is cumulative, but non qualified. This is a rather small issue so it will be interesting to see how much demand there is for a high yield issue, since we have seen so many low coupon issues recently.
The issue should trade today (Monday) on the OTC Grey Market under ticker HLTCP.
In spite of my own skepticism with the various organizations (government and others) releasing jobs numbers it is hard to be negative on job growth.
266,000 jobs simply blew all predictions out of the water, and the last couple of months were revised upward.
Compared to the ADP report of +67,000 jobs in November the government number is simply crazy. Whether either employment report is correct is up for debate I suppose, but I learned long ago that guesses by forecasters are worth absolutely nothing. One thing is almost for sure–there is no recession in the near future.
The equity market are up about 1/2% on the news while the 10 year treasury is up about 6 basis points to 1.855%.
Contrary to previous employment reports we can’t say “this brings the Fed back in play”—at least if we take them at their word without inflation they will not hike rates–and certainly the employment report is not supportive of cutting rates.
Tomorrow we will have the monthly employment report released.
I see that after a bit of a soft report in October with a 128,000 new job numbers the consensus for November is 180,000 new jobs.
ADP released a 67,000 non farm number for November on Wednesday–that is a damned sight lower than 180,000.
So we all know that these numbers are many times in conflict–and in the end, irrespective of what you believe, the marketplace takes the government report as the ‘official’ employment report, typically ignoring ADP.
One thing is almost certain–if ADP is correct we will likely see a sharp move lower in stocks and a 5-10 basis point move lower in the 10 year treasury–recession talk would be back on the table.
Of course my predictions are worth less than a cup of coffee–BUT just in case I am buckling up at 7:25 a.m. tomorrow.
Giant Telecom AT&T (T) has announced the issuance of a new perpetual preferred stock.
This will be the 1st perpetual preferred issue for the company as far as I can find. They do have some global notes outstanding which can be seen here. Additionally there are 2 3rd party issues outstanding (KTBA and GYC) which we do not cover at this time.
The issue will have an early redemption date starting in 2024. Other terms appear to be fairly typical for a perpetual preferred—cumulative and qualified with quarterly payments.
Ford Motor Company (F) has priced the previously announced note issue with a maturity date in 2059.
The permanent ticker has not been announced, but we will have it when known. There is no OTC Grey Market trading, but one may be able to secure shares (bonds) prior to exchange trading by calling your broker with the CUSIP.
The company has 1 other baby bond issue outstanding which can be seen here. This issue carries a 6.20% coupon.