Author: Tim McPartland

Earlier today fabrib posted that some of the big money managers are now looking at launching CLO ETFs. Of course there are already a couple out there that concentrate on the more quality tranches of CLOs. This link should access the article.

Janus has the Janus AAA CLO ETF and the Janus B-BBB CLO ETF.

Anyway while poking around looking for information on CLO ETFs I came across Barrons article on CLOs–this is from April. An interesting read.

This information is just posted for all to access some information on this asset class which is misunderstood many times. It should be noted that when the big money moves into an area it makes me a bit nervous.

Note I don’t own and will never own a common share of a CLO company—I’m sticking to the ‘senior securities’–that is my risk tolerance.

As I mentioned last week I ‘had to’ get to buying some preferreds or baby bonds as I had ‘dry powder’ piling up from CD redemptions. CD rates on the 3 month issues are running in the 4.55% area–not terrible, but not as lucrative as we saw previously when the 5% area (or above) was the norm.

I have been doing some roll overs on CDs even at the 4.55% level–but I have to (in my mind) move portions of redemptions into higher yielding income securities since the ability to reach my 7% target is nil buying CDs and moment markets–thus I went ahead and did a little buying yesterday.

I started off by buying a bit of the new issue Eagle Point Institutional Income Fund 8.125% term preferred (permanent ticker EIIA–but bought under ticker EGLPP) at $24.85. In studying the potential issues out there from other Eagle Point company’s I could have locked down a slight yield advantage with other issues, but in the interest of staying diversified I chose the new issue.

I also added to shares to a current position by buying more of the Wintrust Fixed Rate Reset 6.875% preferred (WTFCP). This is likely only going to last for 3 quarters as it most certainly will be redeemed in 7/2025, because it has a huge reset rate at that time–but for now it is a good place to ‘hang out’ in a security which is very close to my hurdle goal and is likely to remain pinned to $25 even if preferreds in general fall for some reason. I need to continue my hunt for longer term solutions. Banking is an area I am very underweight in–because of my tremendously wrong thoughts that a ‘shoe was going to drop’ somewhere in the sector which of course caused me to miss capital gains–oh well I am wrong plenty of times so this is nothing new.

Well it looks like markets will zoom higher again today–at least to start off. Interest rates ticked a bit higher after economic news but still around 4.06%. All news is good news so up we go.

It seems like we are now just going to get a slow creep higher in our accounts and as I have said many times boring is ok–dividends and interest payments flowing and meeting my 7% target. As much as I say this I am obviously a bit ‘hooked on’ capital gains–double digit account growth is wonderful but addicting– and unrealistic of course. Just the same I search for the bargains–those securities that can give me a good yield AND a capital gain–maybe I need to concentrate more on just getting that solid 7%?

The 10 year Treasury is trading in a 4.00% to 4.02% range this morning. This is refreshing to see after watching the yield rise for a month. It’s hard to believe that it was just a month ago that we had a close at 3.65%. Amazingly the average $25 preferred has remained fairly steady so one could conclude that preferreds are a bit over valued–maybe by 1%. It seems that with writers and commentators touting preferred stocks we have had the potential losses mitigated as those ‘very (very) late to the party’ have supplied demand to keep prices up ins spite of rising interest rates.

Markets are quiet this morning-with little important economic news this week investors are waiting – some taking some profits yesterday, but all in all investors remain tepidly bullish. The youngsters (under 40 years old) haven’t seen a true grinding bear market to speak of where the indexes move lower and lower over many months–or even years. It will come someday, but certainly no one is fixating on it–just would like to avoid those 1000 Dow point drops.