With current interest rates I have found it difficult to be buying much outside of the safe 4.3% CDs – being a total return investor I don’t want to take capital losses in perpetuals if interest rates start to move higher once again. Because of this fear (maybe too strong of a word) I have relegated my buys to short duration term preferreds and baby bonds–and even these I have been very cautious.
Last week I noted that the XAI Octagon 6.50% term preferred (XFLT-A) was trading around $25.00-25.05–an issue which I already hold an overweight position in. Even with the overweight I did buy a few shares–I rounded my position up –I bought all of 45 shares.
In addition I bought
Additionally I bought some more of the Wintrust Financial 6.875% fixed rate reset perpetual (WTFCP)–specifically expecting the issue to be called on 7/15/2025. I paid $25.19 so I gain a little advantage over holding CDs etc–but not a huge long time advantage unless they don’t call it in which case the advantage would be huge for how ever long it is outstanding. The reset is likely to be over 10% so I can’t imagine them not calling it—but stranger things have happened.
So what is next for me? I have CDs maturing pretty much continually in one account or another so I have to make a decision on a non-stop basis. I am pretty sure that I will be looking at the Gabelli CEF preferred–one those with a current yield of 6% with opportunities for substantial capital gains–i.e. they are trading at $20 or so. Obviously I would like to be pretty confident in interest rates moving lower–of course who can predicted that with confidence? Other CEF preferreds will also be considered.
I will get my new purchases posted to the laundry list of holdings page later today.
Tim, if you’re looking for buys, you may want to consider the new PMTV, a 9.0% note maturing 02/2030. It’s trading around $25.50 right now, but even if it’s called two years from now, 02/2027, it will net about 8.0%. PennyMac is one of the four safest mREITS, along with RITM, NLY and AGNC. A lot of folks are mad at PMT for its handling of FTF A and B preferreds, including me, but this one’s a note. I bought some at $25.44.
Didn’t they stop publishing LIBOR end of Sept. last year???
Tactitus, yes. Last published price was 9/30/24.
https://www.global-rates.com/en/interest-rates/libor/american-dollar/21/usd-libor-interest-rate-3-months/
Note – Tim bought WTFCP. That’s a reset, not a floater.
Beginning 7/15/25:
1. WTFCP resets off the U.S. 5-year Treasury.
2. WTFCM floats off the 3-month SOFR (+ the tenor adjustment)
Here’s their announcement that WTFCM transitioned from LIBOR to SOFR:
I found this on p. 165 in their 10-K for 2023 (filed 2/28/2024):
Series D Preferred Stock
In June 2015, the Company issued and sold 5,000,000 shares of fixed-to-floating non-cumulative perpetual preferred stock, Series D, liquidation preference $25 per share (the “Series D Preferred Stock”) for $125.0 million in a public offering. When, as and if declared, dividends on the Series D Preferred Stock are payable quarterly in arrears at a fixed rate of 6.50% per annum from the original issuance date to, but excluding, July 15, 2025, and from (and including) that date (as currently specified in the certificate of designations and subject to the below) at a floating rate equal to three-month LIBOR plus a spread of 4.06% per annum. Under the AIRLA and Part 253 of Regulation ZZ (Rule 253), the dividend rate on the Series D Preferred Stock, by operation of law, changed from 3-month USD LIBOR to 3-month CME Term SOFR plus a statutory tenor spread adjustment of 0.26161%. Consequently, for each floating rate period, commencing on July 15, 2025, any dividends will be paid at a rate of the then-current 3-month CME Term SOFR plus 0.26161%, plus the spread of 4.06% per annum. The calculation agent for the Series D Preferred Stock may also make additional administrative conforming changes to the terms of the Series D Preferred Stock under AIRLA and Rule 253.
I meant to place (as I later did) below under danzeb.regarding WTFCM. Was too late to delete.
Assumed they changed LIBOR to SOFR. Surprised Quantum did not update. as they have for other preferreds. Even emailed Wintrust investor’s Relations and no reply as yet from them. I applaud your research to confirm. Incidentally, though not an individual preferred, may like FSCO-see https://cefdata.com/funds/fsco/
Have owned for quite awhile.
I still like BANC-F. Went ex-div today and is currently trading just a few cents over par with a 7.7% straight yield. It will almost certainly be called in Sept. 2027 when it resets.
Otherwise I agree, there’s not much to get excited about.
Right now banks have a lot of value with the preferred. You just have to read a few quarterly reports to figure out who to stay away from. Like I would not buy FGBIP when there are more stable choices who are improving.
WTFCM also has a call or float on 7/15/25.
“…floating rate equal to three-month LIBOR plus a spread of 4.06% per annum”
Didn’t they stop publishing LIBOR end of Sept. last year???
Yes & yes- the wording often does not get changed to SOFR.
Tacitus,
Is that the same “they” who really control everything? If so, I can tell you THEY would not be bothered with anything so trivial, so no, THEY wasn’t involved.
I hope this helps.