Author: Tim McPartland

While it was a tough day on Wednesday for common share prices income issues hung right in there–essentially flat on the day.

With the producer price index (PPI) coming in favorable to forecasts and retail sales coming in soft the 10 year treasury tumbled 16 basis points!!! The closing yield of 3.375% is the lowest close since 9/12/2022–about 4 months ago.

Right now the equity futures are off about 1% —while interest rates are essentially flat at 3.38%. Things can change in an instant of course so one never knows and in fact as I type this jobless claims just came in at 190,000–way under the 215,000 forecast– and interest rates are popping some and are at 3.41%. Once again employment numbers remain stronger than expected–so this once again reaffirms needs for higher interest rates (at least in the eyes of the Fed).

So here we go after 8 straight days of income issue gains–yesterday was flattish. I will be out of the office again today, but back in tomorrow. I plan to closely review our holdings tomorrow and see if there is a need for some tweaking after recent gains–I remain nearly fully invested and plan to continue to remain fully invested.

Seems like we are always waiting on some type of economic news—today it is the producer price index (PPI) which is expected to be slightly negative for December–as always a significant deviation could move markets sharply.

We also have retail sales today which has become somewhat important recently as everyone scans the horizon for signs of a slowing economy–this is also forecast to be negative – by 1%.

Right now equity futures are up a very small amount—1/3% on the S&P500 as we await news. Interest rates are at 3.46% on the 10 year treasury which is off 6-7 basis points from yesterday. Of course we all knows this can change instantly.

Yesterday the rally in income issues continued–in a very small way. Since I am out of the office I am not contemplating any type of buying or selling–maybe next week.

After a relatively quiet day yesterday equity futures are just slightly green this morning. Interest rates are off 4 basis points or so at 3.46%

The big banks are reporting earnings this morning and are turning the equity indexes ‘red’–earnings are decent–above expectations, but forward guidance is more dicey.

I guess we won’t get an 8th day of gains in income issues–while interest rates are at 3.48% which is up 3 basis points from yesterday sharply red equities will likely drag preferreds and baby bonds lower—I guess on the bright side we are halfway through the month and thus closer to an end of month ‘payday’ in the form of dividends and interest–although January is not a huge month of payments.

As I mentioned I nibbled a CHS fixed to floating rate preferred yesterday. After their earnings report on Wednesday I felt emboldened to add to a current position–CHSCM 6.75% perpetual. I hold this issue because of the yield to worst and because it is trading just under $25. Investors should be very, very careful owning the CHSCP 8% issue with a -17% yield to call (annualized). I know from my research many, many years ago that this issue was owned heavily by cooperative members and thus got preferential treatment by management–BUT management was changed after their misguided nitrogen investments and with a potential call date in July (remember this issue was originally redeemable in 2008, but was amended to move the call date 15 years). This is a small issue of 3 million shares and could well get called–this should trade at $25.50 not $28.13.

Today we have no economic new of any magnitude—so markets should trade without these influences

Let’s go!!

We get the consumer price index (CPI) in 30 minutes and markets are fully expecting a number that meets the forecast or is even below forecast. The forecast is for a CPI of 6.5% and a core rate of 5.7%. Almost with doubt if the CPI comes in hot we will see bloody markets.

The 10 year treasury is at 3.55% this morning which is pretty much flat to yesterdays close with equity futures up a tiny amount. These will likely make huge moves premarket after CPI.

Yesterday was the 6th green day in a row for income issues–a person could get used to this, but probably shouldn’t. No buying or selling yesterday, but today may well nibble on an addition to my CHS holdings–I have a small holding in their preferreds so would be adding to a current position.

So let’s go–on to CPI.