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Author: Innovative Income Investor

Buckle Up! Monday Morning Kickoff

Last week we had quite the wild ride in stock prices with the S&P500 starting the week at 2974 and closing the week at 2972–this was a Friday close 20 points above the week ago close. Of course prices moved in a range of 4% or so during the week.

The 10 year treasury took an elevator to the bottom–or at least the bottom for now. the yield opened the week at 1.07% before falling as low as .66% before closing near the low at .72%.

Not surprising I guess the Fed balance sheet grew by a giant $83 billion last week. This is the first time the balance sheet moved above a range it had been locked in since mid December.

Last week we had only 1 new issue price. This is an investment grade 5.375% perpetual preferred from First Citizens Bancshares. This is a strong coupon for an investment grade issue and I am somewhat surprised that the company went forward with the issue.

The issue is trading on the OTC Grey market ticker under FCIZP and closed Friday at $25.23.

Prices of $25/share income issues closed higher last Friday, although off the highs which were seen on Wednesday.

The all issue average price rose by 18 cents, while banks were 37 cents higher, mREITs up by a dime and investment grade issues were 28 cents higher.

Sunday Night Futures Look Sickly

With an ‘all out’ oil war at hand and no good news on the Covid-19 corona virus it looks like Monday could be a really rock start for the week.

At 5 pm central time the DJIA futures are off around 980 points. West Texas Intermediate crude oil is trading around $30/barrel–a point at which we will probably see further cuts to any oil drilling. Of course this will benefit consumers, but whether the aid to the consumer will out weight job losses and knock on effects is a debatable point.

I watch Bloomberg futures here.

I am hopeful the market will ‘get a grip’ before tomorrows opening of trading.

Nibbling Round the Edges

As the wide swings have been occurring in all marketplaces–stocks and bonds I have just nibbled here and there–not getting carried away.

I bought a position in the new First Citizens Bancshares 5.375% preferred (now trading on the OTC Grey market under FCIZP) for $25.17.

I added a little more VEREIT 6.70% perpetual (VER-F). This is a quality issue–although unrated and the company has been slowly calling the issue, but there remains 30 million shares outstanding. Shares are trading around $25.20. It is a monthly payor.

Now I sit back a wait some more.

The Fed balance sheet grew in the last week–by a massive $82 billion. While I didn’t dig in deep I believe that around $50-$55 billion of this was in the overnight repo market while around $30 billion was in QE (quantatative easing–market operations by the Fed in outright purchase of bill, bonds and mortgages).

Of course we all know the 10 year treasury is now trading at .72%–this makes me sick, as our job as income investors has become more more risky–i.e. we have to deploy cash–no more money market earnings to speak of.

So we slide into the weekend again without having any clue as to what we will face next week–no prediction can be reliable.

First Citizens Bancshares Prices Preferred Issue

North Carolina banker First Citizens Bancshares (FCNCA) has priced their new issue of non cumulative preferred stock.

The pricing is at 5.375%–higher than I anticipated. The issue is rated Baa3 (investment grade). Interestingly this issue has just a 1.30% underwriting discount which indicates to me that with the coupon the underwriters believe this will be an early sell.

Shares will trade immediately under OTC Grey market ticker FCIZP.

The pricing term sheet can be found here.