Author: Tim McPartland

Yesterday with the hotter than expected inflation numbers we saw interest rates spike up by about 15 basis points.–all the way up to 4.31%. I thought a pop was a possibility, but I was thinking mid 4.20’s%. We have been in a range of 3.8% to 4.2% for a while — so now the question is will rates go even higher? Of course I have no earthly idea–nor does anyone else, but I am assuming that inflation will remain under control and through the next 6 months rates will drift back down to 4%.

It has been a while since we have seen preferreds and baby bonds get spanked like we did yesterday—it was not a total wipe out, but it was meaningful as our accounts took modest losses.

It is times like these that one should be looking out there and seeing if there are some ‘bargains’—of course the term bargain is in the eyes of the beholder, but to me if something is down 2-4% a bargain may be present. In my case I was looking at the insurance issues (not banking issues) which were solidly red yesterday–some with losses of 3-4%. 1 issue losing over 3% was the Brighthouse Financial 6.6% perpetual (BHFAP) which I own and since the selloff pushed the price down to $23.82–off 78 cents the issue approached my 7% target I bought another chunk of the shares. Of course there were many other issues that could have been bought. Can prices fall further–of course they can, but if the fundamentals remain acceptable a little more buying might be in order. I will update my laundry list of holdings.

I will note that another of our holdings has gotten pushed lower in the last week—assuming it trades flat today I will be a buyer—I will post more on this issue later today.

This morning interest rates are flat at 4.30% on the 10 year—equities are up modestly. There is no scheduled economic news today, but there are a few Fed yakkers–although the yakkers at this point probably can’t move markets too much given that the ‘higher for longer’ message is firmly in place.

Tomorrow we have bunches of economic news being released and then Friday we have the producer price index (PPI) for January being released, so we will see if 4.31% or so is the high yield for the moment.

After the 10 year treasury has moved in a tight range for a few days we may see it over sharply higher or sharply lower today as the consumer price index (CPI) for January is released in about 30 minutes. Forecasts are that the inflation rate—both top line and core will be falling. The 10 year treasury is trading at 4.16% right now–will we see it at 4.05% or 4.25% before the day is out – very good chance we will see significant movement. Buckle up – obvious and like always there is nothing one can do with investments now–sit back and enjoy the show.

Equities are off a little this morning, but we know this may move sharply higher or lower with the release of the CPI. The S&P500 continues to move to record highs, although yesterday the index fell off quite a bit in the afternoon after hitting a record high. Have we seen highs put in? I have no earthly idea, but there is an almost endless bucket of money out there that can move to stocks but as long as short term rates remain above 4% we are unlikely to see a stampede in–but instead a slow move higher.

Nothing–an appropriate description of what I did in the markets yesterday. Starting this week I will need to start making decisions as a batch of CDs mature. My target remains 7%–but in the end that may be a little aggressive–maybe I will have to accept a little less to fit my comfort level. I love, love, love the CEF preferreds, but few (if any) make the 7% hurdle–maybe I accept 5.7% and then toss the shares in the sock drawer and forget about them. So torn because I really like the BDC baby bonds which are high yield (not sock drawer), but have historically been solid investments. Lots of shorter term bonds and term preferreds available. We’ll have to see after I look at my laundry list of holdings and determine where I need to fill in some investing holes.

I worry–sometimes way too much about things that never come to pass–in this case the regional and community bankers. I have mentioned this numerous times – in spite of decent earnings from most of the bankers there are ‘surprises’ waiting out there. I guess the New York Community Bank (NYCB) situation was one of them–but there are more of them to come. This is one of those situations that one can’t find out where the issues are, but know they are out there. Anyway I decided to exit my last little bits of banker securities–then I can wait and see if something develops that hammers banker issues lower creating true bargains.

So I sold the last tranche of my Bridgewater Bancshares 5.875% preferred (BWBBP) at $ 19.10 – about a 20% gain which includes a dividend or two. I also sold small positions in Customers Bancorp–the 6% fixed to floating rate preferred issue (CUBI-F) and the 5.375% baby bond (CUBB). The Customers Bancorp holdings were sold at essentially a breakeven–I collected the coupon along the way–no capital gains.

So once again today we have little economic news to drive markets, although I always like to see 1st time unemployment claims. We also have Wholesale Inventories released–not likely to move markets. The 10 year treasury is still trading in the 4.14% area where it will likely remain until next week when we get market moving data–the consumer price index (CPI) and the producer price index (PPI). Whether rates get shoved above 4.2% or below 3.8% no one knows–maybe rates stay in this range out until May which would suit me fine.

$25/share preferreds and baby bonds continue with little movement—up a little and down a little. We have grown accustomed to daily capital gains–those days are gone until we see Fed Funds rate cuts and then only if long term rates follow short rates lower.

Looks like a quiet equity day with futures +/- .1%. Let’s get to going and see if markets move more than I think they will.

Below are press releases from companys with preferred stock and/or baby bonds outstanding–or just news of a general interest.

TEN Ltd. Declares Dividend on its Series E Cumulative Perpetual Preferred Shares

U-Haul Holding Company Reports Third Quarter Fiscal 2024 Financial Results

TOP Ships Inc. Announces Vessel Refinancings and Full Redemption of Series F Perpetual Preferred Shares Held by Related Party

Brookfield Asset Management Announces Strong Fourth Quarter Results and 19% Dividend Increase

Medallion Financial Corp. to Report 2023 Fourth Quarter and Full-Year Results on Tuesday, February 20, 2024

Costamare Inc. Reports Results for the Fourth Quarter and Year Ended December 31, 2023

TPG RE Finance Trust, Inc. Announces Fourth Quarter and Full Year 2023 Earnings Release and Conference Call Dates

Annaly Capital Management, Inc. Reports 4th Quarter 2023 Results

Terreno Realty Corporation Declares Quarterly Dividend and Files Annual 2023 Financial Statements

Ares Capital Corporation Announces December 31, 2023 Financial Results and Declares First Quarter 2024 Dividend of $0.48 Per Share

Rithm Capital Corp. Announces Fourth Quarter and Full Year 2023 Results

NiSource to Release Financial Results and Host Conference Call on February 21