We got some economic news this morning which is likely being mostly ignored by investors. The JOLTs (job openings and labor turnover) report softened a tiny bit from last month–7.568 million jobs open compared to 7.762 million last month. I would have thought this would have softened more with all the tariff uncertainty. ISM Manufacturing softened, but didn’t fall off a cliff–49 versus 50.3 last month, although the price component of the report came in fairly hot.
Regardless of the economic numbers the 10 year treasury yield has tumbled by 10 basis points all the way down to 4.14%. Is it a flight to safety or is it a recession being sniffed out? Maybe both.
Preferreds and baby bonds are not acting typical–where big falls in interest rates shove prices higher—looks to me like the green/red ratio is about 50%. Folks are exiting many preferreds in spite of lower interest rates. This tells me maybe I need to buy more high quality low coupon shares today with a potential capital gain coming at some point in time. No use hurrying–with the sour mood out there nothing is going to shoot straight up–unless it is caused by a surprise redemption.
Well now is the time that we start to wait for more tariff news—is the big ‘package’ of tariffs going to hit tomorrow? I suspect some will hit and some will be delayed as negotiating is taking place. Guess we just have to wait and see what happens.
ADP jobs report shows jobs surges in March. 155k compared to the estimate of 120k. Market futures in the red, going to be a wild ride today folks!
Factory orders up .6% vs .4% estimate.
One other thought. It looks to me like folks are exiting the preferred marketplace on a retail level. On my $100 preferreds that trade only by Cusip, I am off marginally. These represent 29% of my total preferred investments. They are not moving all that much compared to my retail ($25) holdings.
I would be interested if other holders of the $100 issues would share what their issues are doing also.
I have a pretty broad exposure to a bunch of $25 issues and I am not seeing much of a move at all in my portfolio today maybe 9 basis points. I bet we get a buy the news rally tomorrow. Actually, maybe we get another flush lower for max pain – then a face ripping surge upward. Glad I don’t speculate anymore but its fun to speculate on speculating.
Dan–you could be right–down early then straight up – for a day (or maybe it is straight up and then a plunge). Like you I don’t speculate much so just sit back and watch.
Do you have any issues that are “sock drawer” quality that you would recommend as worth taking a look at?
I have lots of the Ameren issues which are $100 par and they haven’t moved much.
My illiguids on this site from Ameren, Eversource, and National Grid have not moved much either. I suspect most of these are owned by retail investors.
My $100 issues which trade by Cusip only have been very stable also. NI, JPM, Metlife, Nextera Capital, State Street, Bank of NY, and Citibank. I suspect most of these are institutional investors.
I have seen movement in my interest grade rated junior subdorbinated from the very small companies. Nevada Power, TRP pipelines, and NW National holdings. These are my “base” holdings in infrastructure that represent a very small percentage of my investable funds. Long term holdings.
I don’t mind making the phone calls for the $100 or $1000 institutionals, esp when they have qualified dividends.
Thanks for sharing.
SteveS, where can I find a listing of $100 preferreds that trade only by Cusip? I know of a few, including the ones listed in the Illiquids, but would like to explore more.
Thanks
I am sure anyone with big $ on Wall Street already knows what tomorrow’s news will bring and probably a nothing burger given today’s muted market action.
Bonds are not buying the tariff inflation narrative either. They might be saying additional gov’t revenue is credit positive for treasuries hence lower rates with stronger than expected macro data in the background. WHO KNOWS.
Tim, could the moves in Preferred’s be from funds rebalancing at the end of the quarter? I find it odd too that they are going down with interest rates. Can’t remember the last time I saw a 6% yield on Public Storage Preferreds.
Thanks
Jeff-
What’s up with the large declines in the PSA issues- I like one or two of them, but fear the steep downward trend. All are 6+
Psa-L below $19?. They usually call them on the call date.
A2 rated. I don’t get it either. Tariffs have the market dazed and
Confused.
Haven’t seen them this low since late 2023. These are not qualified and are passed along as REIT dividends, correct?
I haven’t checked, but sometimes REITs have a portion qualified– there’s the 20% 199A (?) to reduce tax.
The idea that we will know the full impacts of tariffs tomorrow is fantasy land. Of course, unless you believe in a world where tariffs can be imposed with no response by other countries.
The negotiations will continue (if we are even negotiating at this point) once this occurs.
Lots of different countries will reportedly be affected but no way to know at this point.
So what’s next? Continued uncertainty.
I agree. The only thing that the tariff proposals will really affect right now is media stocks because they get a chance to boost their appeal by scaring people.
It seems to me that tariff trade wars are games of chicken: I can take the risk better than you and then wait to see who can stand the consequences over the next three to six months. Talk that tariffs are Trump’s favorite word or that he expects major deficit reduction from tariff revenue are hyperbole to reinforce his bluff.
There may be exceptions for key security issues such as drone parts, robots or pharmaceutical base elements.
Also, don’t overlook the U.S. two current major advantages in a trade war: our low unemployment and the fact that foreign trade is such a small percentage of our GDP compared to other countries.