Well here we go on another week–whether one is taking the opportunity to add to some CDs with coupons around 5.3% or hunting and purchasing quality preferreds and baby bonds at bargain prices there will be something available for everyone!!
Last week was a somewhat uneventful week–in spite of the release of the supposed preferred inflation indicator of the Fed–the personal consumption expenditures (PCE) with its various inflation indicating components. Overall I would say economic news last week was a bit soft–we’ll see if that continues this week.
The S&p500 moved almost 1% higher last week–actually +.94% from the close the previous Friday. Can it go higher? Of course it can–for folks who think that shorting equities is a sure fire bet I can only say you better have deep pockets–the trend and the momentum is higher and where it stops no one knows.
Interest rates moved lower last week with the 10 year treasury yield closing the week around 4.18% which is 8 basis points lower than the Friday before. The trading range on the week remained relatively muted as it traded between 4.18% to 4.32% closing on the low as economic news was a bit soft.
This week we have both the ADP employment report as well as the ‘official’ government employment numbers on Friday. This coupled with testimony before congress by Jay Powell are the big items on the economic calendar this week. Remember that last month the jobs number was a total blowout to the upside–so we could see some massive revisions to those numbers.
Fed balance sheet assets fell by $14 billion last week after a larger than normal drop of over $50 billion.
$25/share preferreds and baby bonds moved by only a tiny amount last week with the average share moving 3 cents lower. Overall a 3 cent move is simply ‘noise’. Investment grade moved 6 cents lower, banks moved 6 cents lower with mREIT preferreds moving 15 cents lower.
We had 1 new issue priced last week as asset manager TPG sold a 6.95% baby bond. The issue is not yet trading, but we may see it sometime this week–below are the details.
Well yesterday turned out to be pretty quiet – with the personal consumption expenditures (PCE) released yesterday pretty much on forecast. There had been a pretty big possibility that markets would move bunches if the inflation components were have come in hot, but this was not the case. As investors and not traders I am always happy for less market movement. Bunches of dividends hit our accounts yesterday driving balances to record highs–I am plenty happy just collecting dividends and interest.
I noticed this morning that the hated B. Riley (RILY) whacked their dividend in half last night (from $1.00/share per quarter to 50 cents)–not a giant surprise given that the company had been very generous in the past. While cutting the dividend the company floated the idea of using the funds to start to buy back debt at a discount—some exchange traded debt shares are trading as low as $15/share (against $25/share liquidation value). Probably more important to investors is the company is delaying the filing of their 10-K–already being under fire this delay is not welcome by common holders–shares are off $2-$3/share this morning to be trading around $15.xx.
I continue to believe that B Riley will survive in spite of their own mismanagement–the many, many poor investments the company has made and their large debt position. It is likely the exchange traded debt of the company presents a bargain – but I don’t mess around with junky stuff like this – those with excess funds could invest and realize nice gains maybe.
Did you notice that Xcel Energy (XEL), which is a Minnesota based utility is now being blamed for the Texas wildfire? Additionally they have been blamed for a Colorado wildfire–most all Xcel’s operations are in Minnesota, Colorado and Texas. The common shares were off $5.00/share yesterday to the $52 area. It is becoming obvious that utilities will potentially be ‘on the hook’ in the future for fires. A short company filing with the SEC is here.
The 10 year treasury is trading around 4.24% right now – not much change in the last 24 hours. Today we have the S&P manufacturing purchasing managers index, ISM manufacturing, and consumer sentiment–none of these should be huge market movers–now investors are focused on next week and the February employment numbers which will be released next Friday.
Equity futures are quiet–maybe slightly red–quiet is good — I love it.
The new baby bonds from TPG Operating Group II, L.P. priced last night. They priced at a disappointingly low coupon—6.95%, although they are investment grade they have a maturity way out on 3/15/2064.
This issue contains the following provision–
The Issuer has the right, on one or more occasions, to defer the payment of interest on the notes for up to five consecutive years (each such period, an “optional deferral period”). During an optional deferral period, interest will continue to accrue on the notes, and deferred interest payments will accrue additional interest at a rate equal to the interest rate on the notes, compounded quarterly as of each interest payment date to the extent permitted by applicable law.
Interest rates have been flattish all week long–unusual to go 3 days with the 10 year treasury yield trading in a range of 4.24% to 4.32%.
Today that will change–at least a 75% chance we will trade out of this range with the release of the personal consumption expenditures (PCE) data. The PCE will give us a good hint on consumer spending–i.e. the health of a huge percentage of the economy. Additionally the price index component will provide some inflation data.
The forecast of PCE and the price index is for numbers to come in ‘hot’–the question is how hot? Are interest rates pricing in ‘hot’ numbers? Any actual number more than .1% deviation from forecast will likely move the markets. The 10 year is at 4.31% right now–it won’t take much to move this out of the weekly range–in fact it is possible we could see a 10 basis point move today (or no move at all). We’ll see in an hour.
Also today we have initial jobless claims as we do every Thursday–this takes a backseat to the PCE today, but just the same will be closely watched. This afternoon we have a bunch of Fed yakkers–no doubt some of them will use the opportunity to highlight the PCE data–hot or cold.
Irrespective of the PCE data today and movement of interest rates I never buy or sell thinking I am a smart person before or after the numbers. Markets will do what they will do and individuals (or anyone) can not foretell the movements of markets. So obviously I will not buy or sell anything at all today–business as usual.
I am working on a ‘deep dive’ on CHS–the deeper I dig, the deeper I dig. Really interesting. I will publish it in a few days–I think. I am looking for actionable data–for buying or selling. With the CHSCP 8% issue trading at $31.50 and currently redeemable are holders fools? Maybe. Or if they are not fools they are simply poor investors.
Well it is 60 minutes until data–equity indexes are red premarket by .3%–certainly of all days this is not meaningful.
$225 billion dollar asset manager TPG Inc. (TPG) has announced the coming issuance of a new $25/share junior subordinated debentures.
The issue will have a maturity date 3/15/2064 with an early redemption date available to the issuer starting 3/15/2029.
This issue should be rated investment grade by the major ratings agencies.
This issue contains the following in the prospectus–
The Issuer has the right, on one or more occasions, to defer the payment of interest on the notes for up to five consecutive years (each such period, an “optional deferral period”). During an optional deferral period, interest will continue to accrue on the notes, and deferred interest payments will accrue additional interest at a rate equal to the interest rate on the notes, compounded quarterly as of each interest payment date to the extent permitted by applicable law. For more detailed information on the option to defer interest payments, see “Description of the Notes—Option to Defer Interest Payments.”
Shares will trade on Nasdaq under ticker TPGXL when they finally being to trade–they are not priced correctly yet.