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Another Massive Interest Rate Jump

Slow down–speed kills!!

I am seeing another giant jump in the 10 year treasury today–up 17 basis points to 3.87%. I think something is broken–or the Fed is running off a bunch of the balance sheet saturating the market with supply.

Fortunately the markets are orderly–some selling in bonds and preferred stocks but it doesn’t appear massive–yet. My accounts are up $33 and for the moment I am thankful.

Today is mainly for watching–although I nibbled a few shares of the Apollo Global Management (AAM-A) 6.375% at $23.33 with a current yield of 6.82%. Solid investment grade. That’s it for today.

No doubt every day this week will be interesting–maybe best for watching and not buying.

15 thoughts on “Another Massive Interest Rate Jump”

  1. Is there anything that would prevent Blackstone from stopping payments on the PSB preferred? The coupons on the 3 issues X, Y, Z are so low that there’d be no need to call them unless FED interest rates went back to 0, so why not just stop paying?

  2. What is up with PSB preferreds – Baa2 rating? Why the continued slide? Blackrock bought them out, right? I have picked some up also, but every day investors continue to dump them at big losses. Like I said, there are still folks wanting to get out. Why didnt they get out the last 2 weeks? I dont know. But, I think as each day passes someone throws in the towel, and another person, says, “I’ll ride it out one more day,” and they become the next investor dumping. I still don’t understand why you would buy something if you dont want to keep it. Short term trading is prevailing.

    And… when the winds changes, everyone wants to get back in the game and things rise quickly. It is my impression that the stock market grinds down and down and is very painful as this is weeks or months. But once the selling is done, I always get the impression that in a couple weeks it can erase the many weeks/months of decline. This is why it is hard to predict a bottom and why legging in is warranted. I’ll be freeing up some funds at the end of the week for another leg in.

    1. Is this a case of the CDR preferred fiasco making people gun shy? It seems to be leaking to other cases where it could happen in a buy out.

    2. Mr. C, Its days of IG are about done. Moodys already stated they were heading for sub IG, and then withdrew rating. Acquirer looks to be stacking debt on it. Plus will they become delisted? I aint going down that road here without clarity.

      1. Grid:

        The Acquirer of PSB common was Blackstone, so we are dealing with a very reputable and profitable owner.

        But a potential future issue with the PSB preferreds (I own some) is that Blackstone has stated they will become de-listed if their total outstanding value fell below $75 Million. There are currently $755 Million in par value PSB preferreds outstanding.

        I don’t expect their eventual market value to ever hit that $75M level, but at current prices near $15 for the preferreds, Blackstone could theoretically buy some of them back in the open market at 60 cents on the dollar (or less). Currently, the market value of the three PSB preferreds is down to $468 Million.

        Might be beneficial to monitor the shares outstanding of each issue to see where they stand at year-end. Blackstone will do anything to make easy money. I’d hate to see these preferreds end up with the dreaded “Terminator Dark Fate” status of the Expert Market because the shares outstanding have plummeted due to Blackstone buy backs.

        But at 8.25% yields, they seem worth the small risk.

        As of 6/30/22, shares outstanding were the following:

        PSB+X = 9.2M shares
        PSB+Y = 8M shares
        PSB+Z = 13M shares

      2. Here is something with a purpose I have no idea. It seems right before completing transaction, PSB created a private placement 12% Series A preferred of only 125 shares at $4000 per share. And it sits below the other public preferreds. I have no clue why being the amount is so small.
        Item 3.02
        Unregistered Sales of Equity Securities.
        The information set forth in Item 5.03 of this Current Report on Form 8-K is hereby incorporated into this Item 3.02 by reference.
        On July 21, 2022, the Company issued 125 shares of Series A Preferred Stock for an aggregate cash amount of $500,000. The issuance of the Series A Preferred Stock was made in a private placement in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

  3. Seems like everyone decided to dump income issues today (preferred, reits, dividend payors, etc)

    Several of my alerts hit and I nibbled on some more NSS, LBRDP, PW-A and CTDD. Also flipped a small amount of CUBI-E for CUBI-F

    1. Maverick61….Exchange traded income issues yes, dumped. Strange coincidence though, most of my corporate bonds were actually up on the day (?)

  4. Nasty market – have not bailed on much and even picked up some OPP-B, more GAB-K, tiny bit of PSB-Z. It’s an active war zone…

    1. Hi Gary– IG on the 2 preferred issues–just reviewed by S&P on 8/24/2022

      US$250 mil Preferred Shares ser A

      Local Currency LT

      Regulatory Disclosures



    1. theta, If made 6 months ago, we’d have lost that bet in a big way.

      Really quite astounding.

  5. Hello 7% mortgage rates…..my goodness. The next year is going to be devastating for the homebuilding business, unless these big public builders decide to subsidize lower mortgage rates for their buyers.

    PFF is down another 1% today and is now down 18% for the year. Very difficult to make money in this sector with that behemoth preferred ETF getting shellacked on a daily basis.

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