Below are press releases from companies with preferred stock and baby bonds outstanding. Additionally, news of a more macro economic importance may be posted. Until earnings season (2nd half of January) arrives news may be relatively sparse.
We got the number that we were hoping for–at least I did. A producer price index that was either on target or maybe a little cooler than forecast. It helped equities and interest rates for an hour or two–but now equities are red and nearly 1% off the high. Let’s face it–for now the bloom is off the rose and folks are loving money market funds.
The balances in money market funds just keep climbing—for the week ending January 8th MM funds increased by $66 billion. With MM rates now in the 4.2% to 4.45% area it is easy to understand why folks are parking cash there. I hold the Gabelli US Treasury Money Market (GABXX) and it has a 7 day yield of 4.39%–I am happy at that level and am guessing it will be available for many months to come.
Money market fund balances historically have been relatively steady, but ever since the pandemic they have gone into hyperdrive mode–pushing ever higher. The dry powder to push baby bonds and preferreds higher is massive, but can’t/won’t happen with the Fed Funds at current levels–it needs a spark to ignite that move and with short term rates remaining at current levels there is no spark.
Below are press releases from companies with preferred stock and baby bonds outstanding. Additionally, news of a more macro economic importance may be posted. Until earnings season (2nd half of January) arrives news may be relatively sparse.
Well equity markets are a bit ‘goosy’ today–can’t decide and what they are believing–are interest rates going higher or are they going to drift back down. Almost unquestionably they are awaiting news on the producer price index (PPI) tomorrow and then the consumer price index (CPI) on Wednesday.
In the mean time I did a little buying and a little selling. I let go of a chunk of the super safe Tricontinental $2.50 perpetual preferred-$50 issue (TY- or TY-P or a number of other tickers depending on the quote source). The reason I choose to sell a bit of this sock drawer issue is because it can move kind of violently if we were to see interest rates move higher.
Now I know some think I am getting a bit aggressive but I continue to research and research on the CLO baby bonds and term preferred issues and I am having trouble gathering any info that says they have the huge risk that they are perceived to have—nothing says they are extreme risk. Does that mean they won’t go down? Of course not – I think the biggest risk is they are not well understood and what investors don’t understand they sell off in times of uncertainty. I am closely watching the net investment income and the net asset values of the issues–both will give me substantial indications of where the asset class is going. Of course I monitor the asset coverage ratios closely.
Are you ready for the week?? I don’t know if I am–but I guess it starts today so ready or not here we go.
Last week we saw the S&P500 setback by around 2%–precipitated by strong employment numbers released on Friday. Interest rates were already elevated from the previous week by about 10 basis points–but then the employment numbers sent the 10 year Treasury up another 10 basis points to the 4.80% area.
The 10 year treasury closed up 18 basis points from the previous Friday at 4.78% although the yield hit 4.80% earlier in the day. Quite obviously investors are concerned with strong employment which is coupled with $113 billion in new Treasury money being raised and now they want to be paid more to fund the debt of a deteriorating situation.
Of course there is never a let up in this tense economy in data. The coming week we will see little economic news on Monday, BUT then we have producer prices (PPI) and the Beige Book on Tuesday and then consumer prices (CPI) on Wednesday. Retail sales get added to the mix on Thursday which will give us another read on economy. Looks like the making of another potentially wild week. We’ll see soon enough.
As one might expect the average $25/share preferred and baby bond fell in price. The overall average fell by 41 cents with investment grade issues falling hard by 68 cents. Bankers fell by 47 cents. Closed end fund issues fell by 17 cents, mREIT issues fell 18 cents with shippers moving 2 cents lower.
Note that lower quality, higher coupon issues fell the least. Additionally CEF issues were reletively stable because a large percentage of the issues are short duration baby bonds or term preferred.
Last week was a relatively busy week in new issuance in income issues. None of the issues below are investment grade, but the 2 insurance companies are just a notch or so below investment grade–in a stable market the 2 insurance issues would be excellent buys for most investors with coupons that pay nicely. Obviously with interest rates threatening to go higher it is anyone’s guess whether they go up or down in share price.
