So today we saw the 10 year treasury move to 1.505% for the 1st time in June before backing off a little and closing at 1.485%. Oh well–not such a big deal. The difference this time is expectations are for continuing higher rates–as we all know it isn’t so much the direction as it is the speed of the move–up 2 basis points today won’t kill us.
Generally $25 preferreds and baby bonds were a little red today–not too much–maybe 4-5 cents. I note that some of the B Riley Financial (RILY) baby bonds fell by 1-1.5% as numerous big blocks were sold during the day. Some systems are showing big losses in Fifth Third Bank (FITB), but these issues went ex dividend today.
All in all not a terrible day—and with pertinent news somewhat sparse this week maybe we will see some firming in income issues–at least on a temporary basis.
RILY notes fell yet RILYI continues to trade at a price above the proceeds to be received on its call date of 10/22. Go figure……
That pricing makes sense to me from a risk standpoint. The market could crash tomorrow for a month and RILYI share holders will still get paid full value + coupon. The risk of holding RILYI at this point is essentially zero, and its priced accordingly.
CW – It’s sure not the way called bonds in general trade historically. Basically what you’re saying is it’s better to put your idle money into RILYI at negative rates than it is to hold cash…. I don’t think we’re there yet on called bonds/preferreds…. Rule of thumb on called issues remains that if you want to play them you can get a positive YTC providing you with an annualized rate of around 2% (excluding bank issues which always seem to trade right at or near 0%) or more on an issue to issue basis, some substantially higher…I purposely bot the last two RILY called bonds after their call announcements to far surpass money market rates on idle cash and it wasn’t necessary to pay negative rates to do so on either one..
I’m not suggesting anyone buy RILYI at this price, just that the shares are priced correctly and have no reason to fluctuate with the market. I remember holding a shipping note with a maturity date of May 2020 which barely budged during the pandemic meltdown because the risk of default was so low.
If you’re looking to scalp a coupon or two before its called, CNFRL would be a better bet…although it just went ex-div a week or so ago.