Darned Quiet Day All Things Considered

Considering the political environment we are living in it is a quiet day in the interest rate markets–and in general for most all income issues.

VEREIT 6.70% preferred (VER-F) is a really active preferred today with over 1 million shares traded. We do note that 2 large trades account for a good share of this volume. These shares are trading around $25.35–if I could get it a little lower I would take a small position. It is a monthly payer of 14 cents and is callable (and has been since 1/2019) so it does carry about 1% call risk.

As some noted AGNCM–6.875% FTF preferred from AGNC Investment (AGNC) went ex-dividend today and is being sold today with over over 150,000 shares traded. This issue has an early redemption period starting in 2024 and with a current yield of 6.80% is a better issue than the new 6.50% issue which is trading on the OTC Grey Market under ticker AGNIP and is trading at $25.05/share right now—at least for a couple years as the old issue has an inferior spread of 4.332% when it enters the floating rate period, compared to 4.993% for the new issue.

The new Gladstone Commercial 6.625% monthly pay preferred (GLSDP on the OTC Grey Market) seems to have stalled out in the $25.65 area–for now. Our hope was to hold to $26 and then consider selling most of our position–maybe it won’t get there–we’ll see.

21 thoughts on “Darned Quiet Day All Things Considered”

  1. Last week you ran an article discussing the new preferred from Bank America

    (bac-N.) at the end of the article you mentioned another preferred that you thought was a better investment.
    Could you send me that article or the symbol.

    thank you,

    Aallan

  2. I added at WRB-B at 25.25, 25.20 and 25.11. Rock solid IG rated baby bond from a very well managed large and diversified insurance company. Today’s 10x normal daily volume was definitely PFF rebalancing related.

    Also finished swapping all of my WFC-L for WFC-P. Moves in those two also seem rebalancing related. My biggest mistake was that I’ve been slowly making that swap over days starting at WFC-L at 1460. So, obviously I left a lot of gains on the table. Hopefully I get some of that back with WFC-P.

    Booyah! Just had TDE purchase execute at 25.13 at 4:05pm during the post-closing auction. Wish my order had been for more but I did also get some TDJ at 25.14 on Friday which I think was also a PFF rebalancing related price (followed Gridbird into that one so all credit to him).

    1. Hi LLI-
      It appears somebody big swapped out to of the lower coupon callable WF’s. Big dumps to O, P, N. and huge buy in to L (173,371 today vs 14,489 avg). Lower coupon WF’s been low for a while and I didn’t know why. I understand now. I already have a full position in WF-L, so I averaged down in O. We were looking at all the same stuff. I was too stupid to pull the trigger on TDE, but averaged down some more on WRB-B.

      1. I think that “somebody big” was PFF. I believe they own something like 10% of the preferred market.

        1. Might all be attributed to rebalancing but I wonder how much of this is also window dressing, prepping for a repeat 4th qtr of 2018, and/or folks listening to the talking heads on CBNC saying the Fed may cut another 1/4 point or have to inject more $ into the system in October.

          Take your dart and throw it at the board of guesses…

    2. Now why would a competent fund manager drive down the price and then keep selling low? Because the funds charter requires him to. That’s one of the flaws of investing in funds that have restrictive rules. Their loss is our gain. I doubled own after the drop.

      1. To extend Martin’s point … the mandated selling by PFF, an ETF, strengthens the argument for investment in individual preferreds over an ETF.

        If you like the simplicity of buying a fund a CEF is a better way to go. No mandated selling. Just look for a good entry point.

        1. Not every ETF has dumb rules and there are about 10 other preferred stock ETF’s that could take advantage.

    3. Interesting, I bought WRB-B at 25.26, 25.22, and 25.11. Also bought a fair amount of Enbridge preferreds based on your article. Thanks

      1. kapil – and if you noticed the last hour it hit 25.08. Wish I was able to react that quick.

      1. This typical of fund selling. Lots of volume, late in the day. Good reason to keep low ball buy orders in place.

        1. Is this end of month/end of quarter/maybe end of fiscal year activity typical of PFF? Could there be any other answer as to where all this block volume came on so many issues? Was thinking about getting into WRB-B but went outside for the afternoon…. bot some in PM hours at 25.22… That’s under par stripped isn’t it? Can anyone confirm that was the source of the activity?

          1. I don’t know if it is PFF. Their fiscal year end is 3/31, and the prospectus is silent about this kind of rebalancing other than in relation to changes to the index, which hasn’t happened since July.
            But it might be another ETF

  3. I could use some quiet days. Still exhausted from last week. Bought WFC-P and WRB-B, using them as a sweeps account until it gets crazy again.

    1. Martin–for sure quiet days are good days–although the excitement of crazy days can get a little addictive.

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