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Weekly Kickoff

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%.

Weekly Kickoff

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.

Weekly Kickoff

Well we are coming off a great week in common equities–and while I own few (if any) common equities it is always better to be heading higher than dropping like a rock. We always need our income investors to remain calm and invested–not fearful and heading for the mayonnaise jar to be buried in the back yard.

The S&P500 moved higher last week by a giant sized 3.2%–although about 1/2 of that gain came on Friday. Regardless the gains in the common equities kept preferred stocks and baby bonds from getting beat up for the week. even though the 10 year treasury rose 6 basis points higher.

The 10 year Treasury closed the week at 4.32%, which as mentioned above, was 6 basis points higher from the 4.26% closed the previous Friday. We had mixed economic news on the week with GDP fairly weak, personal consumption expenditures kind of on target with employment (from the official government report on Friday) stronger than expected. We did have the JOLTs (job openings) early in the week showing fewer openings than the previous week–so that dovetails with businesses being somewhat cautious.

This week we have the big FOMC meeting starting on Tuesday and wrapping up on Wednesday with the Jay Powell presser around 1:30 pm (central) on Wednesday. You can be certain that’s there will be plenty of fuel for market moving days this week.

The FED reserve balance sheet fell by around $18-$19 billion which I mentioned a week or so ago as the balance sheet was flat for 3 weeks in a row. Since April 1st we have been at the reduced runoff rate of $5 billion monthly of treasuries and $35 billion of mortgage securities so certainly the balance sheet is not dropping at the rate it was previous.

The average $25/share of preferred or baby bond rose in price on the week by 4 cents. Investment grade issues fell by 6 cents, bankers rose 12 cents, CEF preferreds rose 2 cents with mREIT preferreds rose 20 cents and shippers fell by 9 cents

Weekly Kickoff

The S&P500 had a good week last week with a nice gain of 4.6% as the tariff situation is supposedly improving, although no real ‘deals’ have been done and we are about to see empty shelves at stores as container traffic at Los Angeles are dropping sharply. We did have some strong economic news with durable goods orders rising over 9%–but removing transportation orders were actually down.

The 10 year Treasury closed the week at 4.27% after moving in a range 4.25% to 4.41%–luckily it closed toward the low end of the range so maybe we can see a push below 4.20% this week with the right numbers. We have 1st quarter GDP and then the personal consumption expenditures (PCE) number on Wednesday. As well we have employment numbers the end of the week–and even earlier on Wednesday we have the ADP employment numbers. So with all this news we could push lower in rates–and of course we could see rates shoot higher with surprises to forecast.

The Fed balance sheet moved lower by less than a billion dollars last week–although is 3 weeks in a row when the balance sheet has been essentially flat so likely we see a large drop next week. Certainly this flat balance has been supportive of modestly lower interest rates during this time.

Last week was a good week for the average $25 preferred and baby bond as the average price rose by 33 cents. Investment grade issues rose 32 cents, banks rose 34 cents, mREIT issues moved 40 cents higher. CEF preferreds were up just 5 cents and shippers moved only 6 cents higher.

Weekly Kickoff

The wild ride continues in the equity markets–and will likely continue all through the current week with the tariff uncertainty being front and center. The S&P500 moved higher last week by 5.6%–it didn’t feel like a big up week to me probably because I focus on interest rates which are remaining stuck at fairly high levels.

The 10 year Treasury closed the week at 4.49% which was a massive 50 basis points above the 3.98% close from the previous week. We had a number of treasury auctions last week and they all came off fairly good–just maybe at these higher rates there are buyers for our debt. We’ll see what kind of news comes out of the administration on the tariff front and whether we can get interest rates under control. At this moment (Monday 6 am) the 10 year Treasury is trading at 4.44%.

Last week had both consumer prices (CPI) and producer prices (PPI) announced and both came in fairly soft, but neither announcement moved interest rates lower and the numbers were perceived as ‘old news’–before tariffs start hitting.

This week we have none of the most important economic news being released, although we have retail sales being announced on Wednesday–but it is old news being from March. Maybe we will see strong sales as folks moved to make purchases ahead of tariffs.

Another item to note is that mortgage interest rates took a large jump last week which without doubt when coupled with consumer sentiment falling will hurt the housing market if these high rates remain in place for long. Housing is one of the most important numbers I watch after inflation and employment as an indicate of future economic health.

The Fed reserve balance sheet rose by $4 billion last week–a bounce that occurs about once a month as the Fed continues to runoff their assets–now at the reduced runoff rate of $40 billion a month– of which $5 billion is treasuries with $35 billion being Mortgage securities.

The average $25/share preferred stock and baby bond price took a shellacking last week with the average share falling by 49 cents. Investment grade issues fell 62 cents, banking issues fell 58 cents, CEF preferreds fell 18 cents, mREIT preferreds fell 48 cents and shippers actually rose by 4 cents.