The 10 year treasury yield is at 4.30% right now after the FOMC meeting notes showed more concern for ongoing inflation then markets were anticipating. These rates are knocking down preferreds and causing some pain. Personally I got a nice batch of dividend and interest payments on 8/15 which are being burned up by falling share prices–oh well not one damned thing I can do about that after the fact.
Talk about falling prices – after yesterdays news that Hawaiian Electric (HE) was talking with restructuring experts and other revelations I am quite convinced the company will suspend all dividends (common and preferred) if for no other reason to address the pubic relations disaster the company has on their hands. Can you imagine the headlines – “Fat Cats Get Dividends While Folks are Homeless” if they pay dividends. The Maui situation is absolutely horrendous – unimaginable pain and suffering and if the company has any negligence they will pay dearly.
Yesterday we had Apollo Global price their new fixed-rate resettable baby bonds with a coupon of 7.625%. Seems pretty tasty for a A3 rated issue. At this point I won’t buy any of this one, but I will consider it if rates move higher knocking the price down from $25. I do own a small amount of the AAM-A preferred which is being redeemed by Apollo.
I had mentioned the Nisource 6.50% preferred (NI-B) a day or two ago – I added a few more shares of this utility yesterday at $24.70. If I buy more of this one it would need to tumble to $24.25–I have enough for now.
So for today we are awaiting the jobless claims numbers – soft would be nice – 240,000 is forecast. Then at 9 a.m. (central) we have leading economic indicators being announced – this is forecast as minus .4%.
Well lets go and see where the markets take us today.
What is the ticker for the Apollo Global new offering (or a CUSIP)?
CUSIP / ISIN: 03769M 205 / US03769M2052
Not seeing the quote on Schwab. Is it trading elsewhere?
Jay – it will be APOS
Tim,
Do you anticipate NI-B getting called in 2024? Looks like it will reset at around 8% if it were to reset today.
NewToThis2015—at todays interest rates it would be a close call – I am guessing no. Any move lower in rates would likely bring a call. As long as one keeps their buys below $25 a call would be just fine for me.
On 6/15 they redeemed a private pfd with lower spread (5YT+2.843%), so NI-B should be in the crosshairs.
I don’t think they are a natural issuer of preferreds (according to Grid NI-B was issued in the aftermath of their pipeline explosion) and NI-B is the only one left. They can issue debt around 6% rather than pay 8% divvy,
I’m in under par, so I am ok there. Just wondering what your thoughts were. I hope you are correct in that they are not called.
Time will tell.
How low will TLT go?
TLT at 4.30%
Duration is 17 years.
Do you think 20 year interest rates will go to 5.30%?
if yes – TLT will fall 17%
Do you think it will go up 2%
if yes – TLT will fall 34% approx.
Do you think it will go up 3%?
if yes – TLT will fall 50% approx.
I’ve got the dividends coming in but it seems like the portfolio is just treading water with the pressure on preferreds. I’m ok with that for now because I’m trying to buy a decent income stream for years to come, and, as you said there’s not anything I can do about it after the fact.
I had a full position between various Hawaiian Electric preferreds. I’m taking a good haircut on that one.
Exactly porcupine – I think that is what a lot of us are seeing – happiness when middle or end of month hits then setbacks as share prices fall.
Be careful with the HE preferreds – they are at a very dangerous point now.
Since we’re talking about preferreds from wounded utilities, can someone please explain why anyone would pay over $16 for something like Pacific Gas and Electric preferred C? The chart lists it as having suspended payment and filed for chapter 11. What’s the upside to support a $16 price?
PGC has filed BK twice in the last few years, and they always emerge without letting any debt or preferred default or take any haircut. The ratepayers take all the pain. The CA governor (and his predecessor) goes to some extraordinary lengths to protect them.
IIRC, PGC donated half a million dollars to democrats in the state legislature (they have a super-majority) and $200K to the Governor in the last election, so they are well bought and paid for.
PGC also has a long (and publicly documented) control of the Public Utilities Commission. They would even get to pick which judges would hear their rate proposals. Just insane.
In fact, our current (sleazebag) governor forced through a deal whereby the thousands of victims of the Camp fire (killed 85 people, destroyed 19K homes and leveled the town of Paradise) were forced to accept a “fund” to pay claims that is made up mostly of PGC common stock!. So, if the utility’s stock doesn’t do well, they victims get screwed again.
That is why its worth $16.
Vinny you are on some old chart. They have been paying dividends on preferreds for well over a year now and paid off the accrued back then too. They exited bankruptcy over three years ago.
Oops! That information on PGC was from the iii chart. My mistake was in thinking since the numbers were updated, the descriptive information would be too. Live and learn.
Vinny not suspended, they have been reinstated for over a year. Current yield is 7.53% last x dividend date was July 28th
I own A,BCDH almost the whole alphabet
HE (High Explosives)? Trade with care, Financial Weapons of Mass Destruction ahead.
I read that the demise/pull-back of the once extensive farming/ranching that occurred on the islands may of led to an increase in the available fuel load at the onset. Who knows. Reminded me of the grasslands around Boulder Colorado when there are no buffalo, and whatever other grazers that might be about are outnumbered by the ‘if it’s green it must be good’ crowd. Got out of the truck-camper and tried walking through that vast mat of ‘grasses’ in one of the ‘green protected areas’ and remember thinking how fortunate there weren’t any saber-tooth lions or dire wolves (or regular old lions and hyena) still around cuz I’d of been easy pickings practically immobilized in that sharp-edged dense mat. … Not so long after, it was no surprise a massive fire, with an assist from weather driven winds, ‘mowed’ the grass, and several communities, into ashes. Before the inevitable, those same people happily paid extra to have property abutted on ‘green space.’ Having tooled around the West between Mexico and Canada for years before the damn Covid I realized that living near Western Forests was actually a high risk proposition. Add people with their ‘greasy rags’, and above ground power lines, that follow upon their arrival, strung through dense forests constantly dropping limbs and building up the fuel loads, and I’ll live in town next to a paved 4-way interchange with my dual fuel tanks topped-off, thank you very much.
My guess is the lay of the land in the islands mitigates against burying utility lines except maybe very close to or with a city’s boundary. So either we accept occasional high death counts or the taxpayer is in for a rude shock at the cost of doing business going forward. My best guess is it will be the former. Just look around the World. I long ago lost track of how many floods (pick your favorite shake and bake disaster) have wiped how many thousands in various countries. Should any one be surprised by the ~60K dead in the last shaker in Turkey? No. Will it happen again? Count on it. Did the ‘people’ go right on and re-elect the pol whose policies made him primarily responsible for the high death count? Of course they did.
So I settled in a desert town/area safely away from the forests (I thought) but not to far away for a quick ATV/truck scoot up the nearby mountains. It wasn’t long before a fire killed 19 fire-fighters just over the ‘hill.’ Their base was in town. Like pines loaded with hydrocarbons to ward off pests and so on, the desert plants are rich in waxes and oils to fight desiccation. They burn like gasoline and matches once the fuel load builds up. At least, in the desert, the fires burn out fast so if you have “defensible space” and a garden hose you have a good chance, assuming you can breathe the air and acrid smoke doesn’t blind you. In the desert, besides the Sun ‘cooking away’ the caloric value of natural fuels, we should be thankful for the inconspicuous species of termites that consume vast amounts of natural fuels. Get out there, on your horse with no name, look down, and notice that many of the downed plants near the ground have casings of fine dried sand-mud. That’s them helping us out. … Now where’s that Round-up? The weed’s are going crazy with hurricane powered monsoons this year 😉 The thing that really messes with you in the desert more than all the other things that can go ‘wrong’ is water, not the lack of it, but too much of it all at once. Learn about an old-timer rancher/settler thing called a “check-dam” …
Wether I like it, or not, guess there’s no escaping the weather.
If/when interest rates pull back, you theoretically get the capital back. I have a mix of the old fixed preferreds (and even added at lower prices) and some ones that have/will adjust higher. Also, added a ton of treasuries laddered out about 13-14 months yielding 5.00 – 5.50%. These mature almost monthly so I can decide where to put those proceeds next. My net yield on all of it combined is in the 6-7% range. I have a couple haircuts myself but I also have some that have nicely risen.-
On big down days for the markets, I rarely go down more than 0.1% these days…and on big up days, I might get 0.2%. I am okay with that for now till we see if/when and how deep an impending recession might be. And a mild recession might bring the preferreds that have suffered come back a bit.