It has been a true rarity in the last year that the S&P500 falls by more than 1% in a week. With a fall of about 1.9% last week I am waiting for the buying to come back in – I suspect shortly we will see a bounce back in stock prices-there is too much cash with no place to go.
Interest rates (as measured by the 10 year treasury) rose to as high as 1.59% last week before closing at the week’s low of 1.45% In spite of some straight shooting from various Fed officials rates continue lower. I suspect this will change in the next couple of months as potential treasury buyers are likely to demand a higher coupon if the Federal Reserve is going to taper asset purchases (reduce demand).
The Federal Reserve balance sheet grew by $17 billion last week. A new record high balance sheet—forever higher.
Last week the average $25 preferred and baby bond barely moved at all–down 1 cent. Investment grade issues rose 1 cent, banks rose 6 cents and mREIT preferreds fell a penny.
Last week we had 3 new income issues price.
Tiny REIT Presidio Property Trust (SQFT) sold a new issue of 9.375% cumulative preferred stock. The issue is trading on the NASDAQ now and last traded at $24.44.
Serial term preferred stock issuer Priority Income Fund (not publicly traded) priced a new term preferred with a coupon of 6.125%. The issue is trading on the OTC grey market right now under ticker PRIIP and closed on Friday at $24.98
Lastly Great Elm Capital Corporation (GECC) finally priced a new issue of notes with a coupon of 5.875%. Being debt there is no OTC grey market trading and to my knowledge this issue has not yet traded.
Common stocks are having quite the little tantrum today as the Federal Reserve starts to ponder tapering quantitative easing (QE) down the road.
For those watching CNBC today James Bullard, the Fed president in St Louis, made his position quite clear which started off the tumble in stocks. He wonders why the Federal Reserve is buying so many mortgage backed securities during this time of strong housing demand and rapidly inflating prices.
The funny part today is that treasuries are going the opposite direction to stocks as the 10 year treasury is off almost 6 basis points to 1.455%. Seems like rates would be ticking higher–but not the case.
Regardless of market action today I see this as more of the same–interest rates pop and then drop.
Today and over this coming weekend I am looking for new dividend captures for next month. My watch list has been hammered by redemptions and those left on the list are trading at sky high prices–so time to go back on the hunt.
I have been forced to add incremental security measures to the website.
For those that comment you will see an additional step to logging in–there will be a CAPTHA (by definition a system to distinguish human activity from machines) requiring one to identify certain pictures in the CAPTHA.
This was necessary because of a huge increase in spam and fake accounts. While the spam has been 99.99% successfully filtered out the number of fake accounts has grown dramatically–thousands of new accounts some days–my understanding is most are ‘bot’ driven. Obviously with the number of fake accounts set up it would be only a matter of time until they begin to successfully infiltrate the comment stream.
Any added security measures are cumbersome–but it had to happen–it is the world we live in.
While it took over a month to get the deal done, Great Elm Capital (GECC) finally has priced the issue of baby bonds initially announced over a month ago.
The issue has priced the notes at 5.875%.
The permanent ticker will be GECCO when the issue finally begins to trade in a few days. There will be no OTC grey market trading in the issue so if one wants shares (bonds) before exchange trading they will need to call their broker.
Looking at equities today–and the interest rate complex, it seems like markets are a bit on edge as we await the Federal Reserve Open Market Committee meeting results on Wednesday. Both the DJIA and the S&P500 are off 1/4 to 3/4% with the 10 year treasury up 2-3 basis points.
Right now the results of that meeting are likely more tentative than we have seen for near a year. Prior to this particular meeting I was confident they would continue a steady policy course–QE of $120 billion monthly, but now it would seem that the Fed would have to announce a consideration of a taper on QE–I really doubt their announcement will be more than a ‘consideration’ of a taper.
Of course as always we simply wait and watch. History shows that one can’t really prepare for these types of events. I suppose one could hedge with various instruments–but in the end hedges aren’t free and it is likely a cost will be incurred for nothing.
The one item that concerns me is how little concern there is over a taper. Everyone seems to have bought into the ‘transitory’ story that any deviation may be greeted strongly–oh well I won’t lose sleep over something so uncontrollable.
When money is sloshing around the globe you sure can’t expect stock markets to retreat by any significant amount, but markets are seemingly struggling a bit to gain major traction to move ever higher. The Standard and Poor’s 500 moved up by just 18 points last week—about .4%. In the ‘olden days’ any investor would be most happy moving up by .4% in a week–I know I sure would–but in the world we live in it seems like kind of a ‘yawner’.
Interest rates moved lower on the week (as measured by the 10 year treasury)–a full 10 basis points. Never mind that the CPI moved up .6% (versus a .5% forecast)–no one really cares at this moment–everyone (almost) has bought into the “transitory” inflation storyline. Anecdotally it seems like a serious situation–inflation. Wage inflation is under severe pressure. In Minnesota virtually every restaurant one goes to they have signs apologizing for slow service, because they are short of help. 1 restaurant we tried to go to in Duluth was simply closed with a sign–no help available. We’ll see what happens as job openings were listed at 9.3 million available in April versus 8.3 million in March.
The Federal Reserve balance sheet moved higher by a paltry $17 billion last week–but each week that it moves higher it is a new record high—and I can confidently predict it will move to new records every month for the next couple of years. Oh well–does it even matter–we know where it is going–higher and higher.
As long as we are mentioning the Federal Reserve I will note that the overnight (3 day on the weekend) reverse repo operation of the Fed hit $547 billion on Friday. Wow!! So banks were looking to off load over 1/2 trillion in cash – talk about money sloshing around with no where to go.
Last week, as you would expect the average $25/share preferred and baby bonds moved higher. Like common stocks the move higher was a bit labored as the average issue was up 6 cents. Investment grade issues moved up 5 cents, mREIT issues up 13 cents.
REIT TPG RE Finance Trust (TRTX) priced a new issue of 6.25% perpetual preferred which is now trading on the OTC grey market under ticker TRTXP. This issue closed Friday at $25.15.
Self Storage giant Public Storage (PSA) sold a new issue of preferred stock with a coupon of 4%–the issue is strongly investment grade. The issue is trading under OTC grey market ticker PSALL and closed on Friday at $25.20.
Bank of Hawaii (BOH) sold a new issue of non-cumulative preferred stock with a coupon of 4.375%. The issue is investment grade. Trading under the OTC grey market ticker BHWIL the issue closed Friday at a very strong $25.73.
Specialty lender Atlanticus Holdings (ATLC) priced a high yield perpetual preferred with a coupon of 7.625%. No OTC grey market ticker has yet been assigned and there is a possibility that the issue may not trade on the OTC grey market. I am not aware of any trading in this issue yet.
Globe Life (GL) sold a new issue of debentures with a coupon of 4.25%. Being debt there is no OTC grey market trading. If an investor would like shares of this issue prior to exchange trading they will have to call their broker with the CUSIP shown below.
Lastly collateralized loan obligation investor Eagle Point Credit Company (ECC) sold a new issue of 6.50% term preferred stock. This is a monthly payor and will be popular with investors. The OTC grey market ticker is ECCPP.
Specialty consumer lender Atlanticus Holdings (ATLC) is selling a new issue of high yield preferred stock.
ATLC is a lender to higher credit risk consumers–make sure to do plenty of due diligence before moving forward with any investment.
The new issue has been priced at 7.625% and is cumulative and qualified–the issue is unrated. NOTE that the actual ‘trade’ on this new issue doesn’t take place until tomorrow so NO OTC grey market symbol has been assigned yet. I will post the ticker when known.