Below are press releases from companies with preferred stock and baby bonds outstanding. Additionally, news of a more macro economic importance may be posted. Earnings season has essentially ended so news will be slower until we get into mid April when some earnings will start to appear.
I took a nibble–no it was a double nibble on a new ‘hiding spot’ issue yesterday. I bought the Raymond James 6.375% fixed to floating preferred (RJF-B)–as usual I paid a bit more than I wanted to–$25.16–oh well as I see it is better than 4.3%.
The issue was originally issued by TriState Capital which Raymond James acquired 6/2022. This is one of two issues TriState had outstanding and the other which was a 6.75% fixed to floating issue with a more meager spread than the 6.375% issue was called on the 1st available date in 2023.
This issue is a fixed to floating issue that will go to floating on 7/1/2026 at 3 month SOFR (plus the tenor adjustment of .2616%) plus a spread of 4.088%. Not a giant spread, but for an investment grade issue this would be in the neighborhood of 8.4%. This is a more marginal issue relative to a likely call, but at the current yield of 6.3% it should work whether it gets called or not. Additionally this one has about 5 quarters to run before the floating period (clarification–issue became callable on 7/1/2024, but doesn’t start floating until 2026–thank you mbg). Thus there are a few cents of call risk in the issue right now.
While I have been fixated on hiding spot issues the last number of days I am going to shift gears a bit. Are interest rates going lower? I certainly don’t know, but I have some doubts of much lower rates, although when the next recession hits someday we could see rates tumble. When we start getting lower rates we want to be in some securities that are going to provide that 10% capital gain along with the coupon rate. Obviously this is a timing play and we know none of us can always (maybe never) get this call right. But what the heck–I need to look NOW for those potential securities–mostly perpetual preferreds.
So I will likely start to publish some of my best guesses of some choices for that time when we see rates starting to push lower.
Below are press releases from companies with preferred stock and baby bonds outstanding. Additionally, news of a more macro economic importance may be posted. Earnings season has essentially ended so news will be slower until we get into mid April when some earnings will start to appear.
Well equity markets are ripping higher to start the week–apparently the belief is now the tariffs to be imposed on April 2nd are thought to be less onerous than originally believed–unfortunately it will take just a tweet to turn this around and send stocks back down again.
At the same time tariffs are believed to be less onerous the result is to send interest rates back higher as the fear of recession is tempered somewhat. The 10 year treasury has popped 7 basis points up to 4.32%–really no effect on income security prices–guess folks are getting used to these moves and are starting to ignore them.
I have 3 good til cancelled buy orders in–2 are nibbles and 1 is a ‘double nibble’ of a issue that will be new to the portfolio. As you would expect 2 of the 3 are off the ‘hiding spot’ list, while the 3rd will soon be added to the list. None of these orders has executed as of noon (central) today—damned spreads are wider than one would like and I’m not motivated to chase the prices higher.
I have a number of issues to add to the hiding spot list—but I don’t want to get out too far in the future on the list issues, because we can seldom predict interest rates tomorrow–let alone 2-3 years out. If interest rates go higher or lower from here those issues that I believe are good hiding spot issues will no doubt change.
Are you ready for another week with big moves in equity markets? I am pretty darned certain we are going to see some big moves, which make me nervous, but there is nothing I can do about it—not going to sell, but probably will be doing a little buying—in fact I have a target in mind for today. Of course I will post anything I do.
Last week the S&P500 moved higher by a measly 1/2% (or thereabouts) and the range it traveled in was ‘relatively’ mild compared to the recent past. The range was only in the neighborhood of 1%. This week we have the personal consumption expenditures (PCE) number being released on Friday which we all know will be important, but we also have durable goods and consumer confidence numbers being released and markets will decide if they are important or not.
The 10 year Treasury wanted to push lower all week long and hit a low of 4.17% on Thursday before bouncing to close the week at 4.25% which was 5 basis points lower than the 4.3% close the previous week. Housing release numbers last week were mainly strong–building permits and housing starts BUT at the same time builder confidence fell to low levels. You have to ask if housing permits and starts were so strong why are the builders feeling poorly? Existing house sales were quite a bit above expectations–contrasting with recent consumer confidence numbers which have been pretty weak. Once again these contrasting numbers lead me to believe that folks are somewhat confused as to what direction this economy is taking.
Of course we had the FOMC decision to leave interest rates unchanged–and chair Powells presser left me with the impression he is a bit confused as well–what will tariffs do to inflation etc? There are no firm answers and more data will be needed to have a firm conviction.
Maybe the largest economic announcement last week was that quantitative tightening was getting a little looser as the FOMC announced they were cutting the run-off to around $40 billion/month from $60 billion. I had suggested this could happen last Monday on the ‘weekly kickoff’–I was thinking maybe they would cut the runoff in 1/2, but 1/3 works. We’ll see if it helps move interest rates a bit lower.
The Fed balance sheet fell by just $4 billion last week–we’ll see if this starts to show the average monthly at $40 billion right away–no doubt in my mind this will happen instantly. If this helps rates down 5-10 basis points it will keep a little of the political pressure off the Fed – FOR NOW.
Last week was pretty quiet in preferred stocks and baby bonds as the average $25 share price rose by 4 cents. Investment grade issues rose a penny, banking issues rose 7 cents, CEF preferreds fell a dime with mREITs off a nickel. Shippers popped higher by 6 cents.
