Category: Monday Morning Kickoff

Another week with more data which seems to indicate an economy which is slowing–but at a snails pace. At the same time we are seeing inflation which has remained under control (at least for now) while demand at Treasury auctions has been respectable.

The S&P500 moved in a fairly tight range of 5963 to 6059 before closing the week at 5977 which was down almost 1/2% from the close the previous week.

Interest rates remain ‘stuck’ in the 4.30% to 4.50% range where it has been for 4 weeks or so. No matter the economic news rates are moving in this range. Inflation would seem to indicate rates could go lower–but the bond vigilantes push rates higher anytime it looks like they are ready to move lower. All eyes remain on the U.S. budget process, which is painfully slow, and has not brought any ‘deals’ toward deficit reduction.

This week has the potential to move markets sharply as we have the FOMC meeting starting on Tuesday with the announcement on rates on Wednesday afternoon as well as the Jay Powell presser. We continue to have pressure from the administration for lower rates with inflation seemingly under control. The CME Fedwatch tool shows just a 3% chance for a rate cut at this meeting–essentially saying no chance of a cut. Obviously with the high odds against a cut any surprise cut would make markets move big time.

The Federal reserve balances sheet grew by $4 billion last week– of course still trending lower by $30 or $35 billion monthly.

Last week, once again, we had little movement in $25 preferreds and baby bonds–flattish is almost always good–at least for my portfolio. The average share moved 5 cents lower with investment grade issues off 9 cents, bankers down 6 cents, mREITs were up 7 cents and shippers were off 5 cents. Numbers are a bit distorted this week as 6/13 was a huge ex-dividend date and share prices were marked down by the dividend amount.

A new week, although likely to be the same as last week with some volatility in equity prices with various DJT tweets and battles in Congress over the new budget details. We’ll find out who caves in as the congress people and senators joust mightily—we’ll judge who has the longest nose as they speak.

The S&P500 moved higher around 1.75% as markets liked the ‘official’ government employment report–slowing, but not too much too quickly. Markets have gotten used to the tariff issues and I guess generally are adjusted to all the Washingon balony–for now.

The 10 year Treasury closed to week at the high point of the week on Friday at a yield of 4.51%. Once again, as has been the case for weeks and weeks rates traded in about a 10-15 basis points range. No doubt this can’t continue forever but if it did maybe it wouldn’t be so bad.

The big economic news for the week will be the consumer price index (CPI) release as well as the producer price index (PPI) on Wednesday and Thursday. Now we would normally think this is a time for some potential big interest rate moves–but who really knows anymore.

The Federal Reserve balance sheet fell by $1 billion last week as we knew it would after multiple large drops in previous weeks.

$25 preferred shares and baby bonds, once again, moved little last week. Just like interest rates–shares can’t get any real juice in either direction. The average share moved higher by 4 cents, investment grade issues moved 5 cents higher, banks were up by a 3 cents, CEF issues by 2 cents as were mREIT issues. All things considered not a bad week.

Last week we had one new income issue sold as PennyMac Mortgage Investment (PMT) sold a 9% senior Note issues.

Well last week was certainly plenty exciting–as have been most weeks since the last presidential election. The S&P500 traded in a range of 5843 to a high of 5943. A range of less than 2% has been on the low end of the normal range – just maybe investors are learning to ignore presidential tweets–am hoping that is the case.

Interest rates, as measured by the 10 year Treasury, continued in their range of 4.39% to 4.50%s where they have been ‘stuck’ for the last 3 weeks. Economic news that has been fairly decent–certainly not ‘hot’, has been balanced with more tepid government debt auctions and administration chaos. Last week we had the personal consumption expenditures (PCE) was released showing very modest levels of inflation. Consumer sentiment has continued to make gains as folks are adjusting to the ‘tariff’ situation.

This week we have employment numbers on Wednesday (ADP) and Friday (official government numbers). Prior to these numbers we have the JOLTs (job openings and labor turnover) report on Tuesday.

The Fed reserve balance sheet fell by $15 billion last week– kind of a surprise to me , but likely meaning we seen little movement downward for the next few weeks. The balance sheet is down to $6.7 trillion from the peak around $9 trillion –this progress over a period of just over 3 years. The lower the better as it makes for some Fed flexibility for dealing with potential future ‘troubles’.

Last week the average $25 preferred and baby bond moved only a penny–down by 1 penny. Investment grade issues moved 6 cents higher, bankers were down 4 cents, CEF preferreds were up 2 cents with mREIT preferred were off 8 cents. Obviously a pretty steady week.

Last week we had just 1 new preferred issues sold as UMB Financial sold a fixed rate reset issue with an initial coupon of 7.75%. Almost undoubtedly they will use the proceeds to redeem their 7% fixed to floating rate issue on 7/15/2025.

Well I hope everyone got their brains rested up so you can navigate what is almost certain to be a wild week–it looks like we should have lots of twitter action ahead as DJT has been active the last few days. In particular in regards to Apple, the EU and Putin. Of course one never knows but it seems that the number of potential twitter targets continues to grow.

The S&P500 fell by 2.6% last week from the close the previous Friday at least partially on the back of tech stock Apple being battered on Friday based on a DJT twitter attack through the week from the administration threatening high tariffs if iPhone production was moved to the U.S. We all know that there is no way to move that production anytime soon so it is likely that there will be a ‘deal’ cut on a timetable to move it onshore. We didn’t have any particular economic news that was important in a major way so markets are moved on tweets.

The 10 year treasury closed the week at 4.51% which was up 6-7 basis point from the close the previous Friday. The yield had been as high as 4.63% earlier in the week because of some treasury bond auctions that had more tepid demand, but investors decided that to buy Thursday afternoon and Friday bringing the yield down somewhat.

The coming week will bring a few important pieces of economic news with the FOMC minutes being released on Wednesday and then 1st revision of Q1 GDP being released on Thursday–the original number was a minus .3%. We wrap up the week with the PCE (personal consumption expenditures) being released–will it show a jump in inflation or not?

The Fed balance sheet assets fell by $29 billion last week—after a number of weeks in a row where the balance sheet remained fairly flat it was expected we would see a fairly large drop.

With movements in the 10 year treasury yield last week we got more moves down in the average $25/share preferred and baby bond prices. The average share was off 15 cents with investment grade issues off 21 cents, banking preferreds off 20 cents, CEF preferreds off 12 cents, mREIT issues off 10 cents and shippers off 9 cents. Over the course of the last year the average share price is down 2-3% BUT since September 2024 the average share price is DOWN almost 8%. As one might expect the most damage was down in the high quality issues with investment grade issues down over 12% since September.

Last week we had just 1 new issue price as asset manager KKR sold a investment grade subordinated note with a coupon of 6.875%.

Already at 8 pm (central) we have the equity futures market way up–1% – 1.5% after so called progress was made in U.S. – Chinese trade talks. Honestly I would be surprised if this tussle was resolved anytime soon given than no trade issues have been totally resolved yet with anyone let alone China. But as I always say better up than down with equities since we are likely to get a boost with preferreds and baby bonds with strong equities assuming a flattish 10 year treasury.

Last week the S&P500 was off by about 1/2%–essentially unchanged. I don’t consider 1/2% changes to be meaningful in fact over the course a week a change of even 1% is not a big concern. Remember that most of the time that small changes day to day in equities and interest rates won’t do heavy damage to most portfolio holdings–yet speedy moves up or down can hurt (or help) all of us.

The 10 year treasury closed the week at 4.38% which was about 6 basis points higher than the close the Friday before—the range was 4.26% to 4.40%. Given that the range was 14 basis points in a week in which the FOMC met with a Jay Powell news conference this is a relatively tight range. The Chair didn’t really surprise anyone with the meeting results as everyone expected no change in rates and that the Fed has inflation worries.

This week we have more important economic news being released–consumer prices (CPI) on Tuesday, followed up on Thursday with producer prices (PPI). Obviously this will give us early warnings on tariff effects–although maybe not

The Federal Reserve Balance Sheet rose by about $1 billion last week after a relatively big fall the previous week.

Last week the average $25/share preferred and/or baby bond was off 5 cents with investment grade issues unchanged, banking issues down 4 cents CEF Preferreds up 7 cents, mREITs down 4 cents and shipping issues up 11 cents.