JPMorgan Chase has priced their new fixed rate perpetual preferred right where it was expected–5.75%.
The issue is a fairly massive issue with 59 millions shares being issued with another 8.85 million available for overallotments.
The issue is normal in all respects–qualified dividends, non cumulative (since it is a bank) and optionally redeemable about 5 years after issuance.
Shares will trade on the OTC Grey market under the temporary ticker of JPMLL.
The pricing term sheet can be seen here.
Tim, Did I see once you had a list of the CORTS? Not now seeing it.
It showed up on Etrade this afternoon so I bought some at $25.01. Also picked up AMH-D @ $25.15 and put in some low-ball orders for other names if selling pressure continues.
Its amazing how unrelated prices of preferreds are compared to 2013 when 10 year last popped above 3% prior to this year…Most issues cant be compared as they have been redeemed, but a couple quick examples show what could happen…RNR-C today $25.23 was $21.42 during last plus 3% ten year in 2013 (ala Taper Tantrum). KIM-I $25.16 today and $20.31 (2013). So we really arent in a general selling pressure period yet.
That’s a great observation Gridbird. Have been speculating the upward pressure on these preferred issues, many of which well-over par, is due to two primary causes: 1) the sea of QE cash still in the system, and more importantly, 2) the absence of a balanced realistic risk/reward equation in the market. I run IRR tables on my spreadsheet that auto-update and flash red when an IRR to call has been bid up to less than 4%, or <1% from TNX. I had one that still had a few years to go reach an astonishing 3.68%. That's just crazy. Needless to say, I've been selling into this loco-pricing.
Different time. Different opportunities. I see what your pointing out but I think there are so many factors beyond just the 10 year yield that might account for the difference between preferred prices now and then. Frankly, I would welcome those share prices again but I have to deal with what we have not what we wish we had or what might lie in the future. We could revisit those price levels but tell me when and I’d know what to do. In the absence of that information, there are opportunity cost with doing nothing but sitting in cash. Interesting information though.
Retired, I have no magic bullet to share, as every option provides it own risks and rewards. My approach is varied, such as owning some decent quality term dated issues, some very solid trust preferred debt with maturities in 2034 range (solid 6% plus with a defined maturity works for me). These issues assuming credit quality stays unchanged will not move as violently as perpetuals would if rates rise. Also, past call perpetuals that carry above market yield, will not drop like a just issued perpetual would. Also some bonds can be inserted as substitiutes. For example one of our posters here Kaptain Lou got me in a solid BB+ senior note (Mack-Cali) this week with a 5.23% YTM in just 37 months. ….But of course if someone thinks long rates are not rising, new issued perpetuals would be the perfect buy.
I have a similar stable of preferred issues and I agree with your approach but I have also purchased some of the recently issued high quality perpetual issues. I don’t know the direction of interest rates in the future. Who can say for certain? Rates go up and down over the years so newer perpetuals have a place and a purpose in my portfolio. I find it hard to believe that the 10 year gets back to what used to be considered “normal”. Don’t you think the cost of interest on the national debt would be a cap on rates going forward absent some huge explosion in GDP. I love a good protected downside issue as much as anybody but I’m also concerned with the certainty of an income stream, as I don’t expect to eat up my entire principal. In retirement. I’ll leave that to those that inherit what remains when I’m gone. It’s a balancing act. I like a little of this and a little of that to make life interesting. 🙂
Retired, as Im sure you agree, mixtures of terms is good, so having this JPM issue as part of a diversified group of issues in portfolio is fine. I dont see a bond yield route either, but 50 basis points in yield increase could send quality perpetuals down a couple bucks. Of course a good whiff of panic would always help buying opportunities such as 2013. Some new investors may not know these can be volatile in pricing.
The two tear treasury is now just about where it was during the “tantrum” with more rate hikes likely. This seems to be an inflection point
I got tired of waiting for Fidelity to activate on their online system.
I called them and they took the order over the phone.
Sold JPM-A ( at break even ) and used proceeds to buy 200 shares of this issue at $25. Figure it’s an OK swap for a higher yield.
This is trading on Schwab already. $25.00 9.5M shares.
Not active on Vanguard or Etrade. Fidelity shows symbol on Cusip lookup but you cannot trade yet
It is trading on TD Ameritrade.