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A Nice Green Day in Income Issues

Today was a solidly green day in preferreds and bonds–interest rates keep moving lower as the economy appears to be softening. It is nice to get a green day (although not very meaningful).

New home sales in particular announced yesterday were horrendous. 591,000 units against a forecast of 750,000. Is anyone really surprised–mortgage rates moved from 3% to 5.25% – seems obvious to me.

The 10 year treasury is now yielding 2.75% after trading as low as 2.71%–levels not seen April 14th. All of this is suggesting there is more and more conviction that we will see a recession in the next year. We will see what happens next month when the Fed starts quantitative tightening.

Today the minutes from the FOMC meeting reaffirmed 50 basis point increases in the Fed Funds rate in June and July–no surprise there and obviously markets have been well warned of the coming increases.

This week I only made 1 purchase – 100 shares of Liberty Broadband 7% preferred (LBRDP) at $25.50 – a current yield of 6.75% (plus or minus). This 100 shares adds to a position I established some time ago. This preferred is not optionally redeemable and must be redeemed in 2039. A very solid issue—I wrote about the issue 2 months ago here.

Of course I continue to watch for favorable pricing for more purchases, but I think there are many months ahead where we will get favorable pricing.

30 thoughts on “A Nice Green Day in Income Issues”

  1. Preferreds have had an impressive run this week. There are 31 issues >$10 that are up >=8.0%. That said, the same group is still down -20.8% year to date. It is interesting that the COF-* issues we talked about over the weekend have bounced up nicely.

    Ticker, % change from 5/20 through 5/26, YTD % change
    SIVBP 17.2 -15.8
    WAFDP 15.5 -20.8
    NYCB-A 12.8 -8.3
    COF-N 12.2 -28.6
    COF-K 11.4 -24
    BHFAN 10.8 -16.8
    COF-I 10.7 -22
    COF-J 10.1 -23.3
    DTLA- 9.9 -22.7
    COF-L 9.8 -28.5
    GPMT-A 9.7 -14.1
    HBANP 9.3 -25.4
    SBNYP 9.3 -24.4
    SYF-A 9.3 -21.8
    SI-A 9.2 -27.1
    BHFAM 8.7 -27.7
    MS-O 8.7 -24.9
    SITC-A 8.7 -1
    MET-F 8.6 -12.8
    ALL-I 8.4 -11.3
    BAC-S 8.4 0
    WAL-A 8.4 -12.8
    OZKAP 8.3 -22.1
    FATBP 8.2 7.4
    FRC-M 8.2 -28
    WBS-F 8.2 -12
    USB-Q 8.1 -25.7
    BAC-N 8.1 -14.5
    BHFAO 8.1 -6.6
    CNOBP 8.1 -17.7
    PRE-J 8.1 -19.6

    1. Kicking myself on SITC-A…wanted to buy under 23 (got as low as 22.55 on the 18th) but I had to place a limit order that never filled. Now it is at 25.58!!!!

  2. Lots of good plays still out there…

    The ENLINK $1000 instl pref looks decent at $70.

    FBRT-E is a large mortgage reit with loans to mostly multifamily properties, not exactly the riskiest space. Plus, their common/pref coverage is something like 7x.

    CSR/c at 24.5 is a 6 5/8 coupon backed by a safe multifamily reit.

    Or NRZ/d is still nice around $23.

    1. Sold my NRZ-A and bought more NRZ-D today

      CWMF (one of the few SA guys I read / trust) had a nice article that touched a bit on NRZ-D. Current yield’s were almost equal, but D has a longer timeframe to call and a better kicker / formula when it does go floating in 2026. Plus it is much more under par than A – so if called (yeah 4 years is a long way off) some nice capital gains too

      1. Yup, Maverick. I like how Nrz is managed by fortress. Yes, their fees are nutso, but as a pref holder, I mostly care about them not blowing up. Also, their business has plenty of internal diversification with MSRs and the mortgage underwriting business.

    2. Maine…I have never heard of CSR…but based on a cursory analysis it does not meet my definition of safe.

      1. RetiredBroker, here are the main reasons I like CSR/C

        1)Back by real assets, these are solid multifamily properties, not distressed office or retail
        2)Conservative balance sheet
        3) the common to pref ratio is almost 15x

        Hope this helps!

        1. Whelp, wish they were always that easy. As much As I like it, I sold my CSR pref as someone was willing to bid 25.6

  3. Orders Accepted on Vanguard at par for 6/3/22 Issue:
    Product description
    Issue FORD MOTOR CREDIT COMPANY
    CUSIP 34540TZB1
    Product type New Issue Corporate
    Coupon 5.400
    Maturity 06/20/2024
    Pay frequency Semiannually
    Moody’s / S&P Ba2 / BB+

    1. Only $135.6 billion of debt at Ford, why not a little bit more fuel to throw into the fire 🔥

        1. Hmmmmmmmmm, well maybe F could go BK within a year and then Govt rewrite bond law for this one particular case to screw over your claim as a bondholder in favor of unions. Oh wait a minute, that was already done before with GM…..

          1. F, GM

            @2WR…so true so true

            Been there and DONE that with General Disaster Motors. What a racket!

            I had just sold the “Good GM” bond that got eventually got bailed out (because of the BS bank reorg/gov bailout thing). I bought the “Bad GM” bond annnndddd banko…..doh!

            Actually came out even with some interest before it went banko, sold the new GM shares, and I think there were rights or warrants that I dumped too. Wadda DizAzzter

      1. This figure for Ford is very misleading. They have appox. 20 billion of auto (manufacturing debt, the balance is from Ford Credit (financing of cars) which is covered by the vehicles financed and actually pays a dividend to Ford . They also have over 20 billion cash. This from 2021 year end. Fitch states Ford has one of the global auto industry’s strongest liquidity positions.

    2. I own a good position in the F.PC issue
      6% – pays quarterly
      I got it under par in a tax differed account for my higher risk bucket.
      For as little as I own, if they bankrupt they could melt down some wheel rims and send me a check.

  4. Sure is a nice couple of days.
    Nice reward for picking up IG positions two weeks ago.
    Now I wish I got more.
    I think this rally has something to do with the 10 year pulling back down to 2.75% or so. Even with QT in our face, we might be in a “place holder” as to where investors are waiting until 2nd quarter GDP. 1st quarter was revised down so we might be in a situation where there is some hedging going on.

    I’m just accumulating IG issues on positive cash flow. If there is another down draft I will move in some dry power from other accounts and smile all the way to the bank. I can’t catch those good opportunities like Grid does with FRMEP and such but I have bigger issues that are on the golf course. I had 8 puts for birdie yesterday and missed them all. I’m outraged.

    1. The Fed dialed back their rate hike projections possibly pausing this fall.
      I’m playing this like a temporary rally.

      1. Sure.
        I’m suspect of it myself.
        But my guess (and it is only a guess) their “pause” will become their “new” normal rate as it becomes a “strategic” pause or something silly like that until some wishful data comes along. What that data is, nobody knows.

      2. “I’m playing this as a temporary rally” Me too. Cash % 4 days ago: 8%. Cash % now: 22%

    2. Pickle, Yesterday, I forced the market front running jackarses to cough me up several hundred more shares of FRMEP at 25.62 yesterday. I got quite a few as its one of my biggest holds. I wish I had bought even more near par when I had a chance a few weeks ago. Its now just in a hold range for me now. Over 26.50 and I personally would probably kiss some goodbye.
      I feel your pain. Shot four over 76 today with zero bird putts made also. At least I didnt yank one in the creek like Pereira did Sunday. If he hadnt choked I would have brought home $1100 instead of just $300 I won.

      1. I gotta learn the GLG Method – aka “Gamble Like Grid.” It can’t be often that one gets to place a bet where if you win, you win $1100 but if you lose you make $300…..lol….More power to you…..

      2. If only you could deduct that $800 difference on your tax return somehow.
        There should be a column for “Just blame the other guy”

        I do scratch my head on issues like FRMEP. I’m thinking if I fill all the IG positions I like, maybe grab FRMEP at around 26 (still over 7%) hold it for 18 months and dump it way before the 2025 call date. So it could be a savings account but I flinch at the low volume. I got some noodling to do. Putting practice too.

        1. Its an odd duck, Pickle. Its now a “big bank” IG preferred with a tiny cap sized solo issue. A $25 million float will trade volume wise very uneven day to day even though its only a couple years old. People dont see an IG rating because it was never rated and now FMRE sure isnt going to pay for it, and I suspect its a goner first chance they can redeem it. As they dont use preferreds for their capitalization purposes.
          2WR, I literally have never lost going across the river past year and half since they opened up the sportsbooks. But I only do it a couple times a month and when I feel it. And if they are crazy enough to give me even odds on Tiger making the cut at the next major, I will make them pay again just like the Masters and PGA. 👍

  5. Took away some of the pain on the IG preferreds I bought 3 months ago.

    Very curious what the threshold coupon level will be for the Banks to call in the coming months.

  6. Took this chance to do some selling. Dumped a couple preferreds at a smaller loss. Made up for it with a surprise 6% gain in 2 days with SYF-A.

    1. I have been playing with dirtbag crypto bank SI-A. That has been a up and down bouncer. Dumped my shares today for a 1.25 gain just buying yesterday. I have done this a couple other times in past week for at least a $1 gain. Definite small ball of 400-500 shares a pop though. It may go up a lot more from here, who knows, but I am done playing in this sand box. This was all I did today was dump those. Been nice watching most of everything popping up. About time to want them to go back down again, ha.

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