Mid Day Ramble

As expected the 10 year treasury is tumbling today after ending lower yesterday–currently it is at 2.635%. If these rates continue we will see some modest housing stimulation in the spring market as mortgage rates move a bit lower–and in many markets value are falling a bit–a good combination to help the lethargic housing market.

Today the preferred and baby bond markets are firm to higher with the average share up around 3-4 cents. We have NO new lows today–the only 2 issues showing on the list today NEAR new lows are the 2 issues either being redeemed or expected to be redeemed–the 6.70% JPMorgan Chase perpetual (JPM-B) which has been called for redemption and the 6.375% Seaspan baby bonds (SSWN) which matures on 4/30.

The new JPMorgan Chase 6% preferred (JPM-C) is trading on the NYSE today–wow if we would have thought the issue would trade this strong we would have bought some–now at $25.86/share. Can’t imagine wanting a 6% issue this badly-oh well I guess that is what makes a market.

The clock is ticking on the government shutdown, the Chinese trade tariffs as well as the debt ceiling. It looks to us like these items will dominate much of the news over the course of the 4 weeks. If these were resolved we would have find something else to worry about.

30 thoughts on “Mid Day Ramble”

  1. Would experienced folks explain to me why Vally National Bank’s two current issues VLYPO and VLYPP had big moves with lots of volume in opposite directions today?

      1. Ah yes, my little pea-sized brain seems to recall that this de-listing was mentioned here some time ago. Thanks.

  2. Tim, I just dumped all my NI-B at $26.94. It just simply became a math equation at that price. The reset occurs off $25 not $27. This could face the fate the Canadian reset preferreds have already undergone and sank well under par. I just used this opprtunity to move more into Canadian ute resets from Emera and Fortis (both heavily into US regulated US utilities). Basically getting same yield, but now I am on other side of the reset fence and way under par.

    1. Grid–crazy isn’t it. Every darned issue I bought has gone way up–guess I should be happy, but actually wanted to buy more shares (including NI-B)–O am not chasing them higher.

      1. Yes, something happened odd, Tim. Heck I bought RNR-C just a week ago and flip for over 60 cents a share gain today. At near $26, past call and down to 5.85% yield. See ya! This has been a good smaller consistent flipper over the years too. There will be a chance to buy it again soon enough. It always happens.

      2. Tim, I’m with you. Everything has gone through the roof and sitting on my hands again. 5 of my 16 pfds are sub 6%. In NI-B at 24.75 and it’s at 27.38, CNLPL at 54.80 and it’s pushing 57, even NCZ-A in at 22.79 and it’s over 24. I like kaptain lou’s idea of a steady long-term hold but these numbers are getting too far out there. The problem is there aren’t a lot of replacement candidates at these levels. Of course, as you’ve pointed out previously, we could lock it in, go to 2% treasury for 12 months and still end up with an excellent, likely S&P beating gain for the year. Need to review the holding period for each for short-term v long-term tax consequences. Seems no point in riding them all the way back down if rates turn up again.

        1. Alpha
          Remember it wasn’t that long ago when “good stuff” got bid up to yield 5.5%-5.75%. Right or wrong, it looks like it’s heading right back or close to that now. Not there yet. Everybody that bailed to cash along the way in the last month left money on the table and is now stuck with little to no yield at all. I’m not trying to say things can’t go south, of course they can, and in a hurry . I would need to see at least a peek of that before I start selling off though. I 100% agree that deploying extra cash into market right now at these levels is tough. I had a little bond money roll in and put that into Grid’s true love MTB- today.

          1. P, I have way too much money in both MTBs. But Im going to need time to roll money back into ute preferreds. I used to run 75% plus in Ute preferreds now I am around 40% and losing NI-B didnt help. But I can get same current 6% yield NI-B essentially has now from other utes with same and better credit quality and get 20% plus under par sitting on low resets. Im just going to need time to get them bought.
            One shouldnt totally discount buying EBBNF from Enbridge at its 19.80 price, if looking for QDI. I already bought a full position at 18.20 ave. so I am done. But you get a QDI 6.26% going exD in 2 weeks, that is BBB- rated from S&P. It is USD $25 par, tracks off US Tbill and currency. It got reset off a horrific 1.80% 5 yr Tbill reset from last summer 2017, and resets in 2022. Its hard to find an another 6.2% QDI BBB- of any issue let alone on that is not as exposed to perpetual yield risk long term due to the low reset. Its something to track if nothing else.

            1. Thanks Grid. A quality reset at 6.26% plus divi sounds enticing, even though I’m not fan of Canadian. Maybe that’s only because I bought some real bonehead Canadian issues in the past that left a mark. I usually turn my nose up at buying or holding under 6% but own some now because recent continuing capital appreciation is reason, at least to this point. Nothing much better to buy either. I expect to see “good stuff” bid to yield back to 5.5%-5.75%ish (recent JPM 6% is already at 5.75%) in the short term. How long that lasts is anybody’s guess. I’m not a buyer at these levels but will continue picking up capital gains until something changes. A 6.26% plus divi would get me closer to my buy comfort zone.

              1. P, the unique factor on this one is even though its Canadian mega giant pipeliner Enbridge, its all US payment and terms (minus the foreign withholding if bought in taxable). Enbridge is also a monster player in US also, got a recent credit upgrade, and has 64 straight years of common stock dividend payment. I have been buying another Canadian ute already reset 20% below par QDI preferred that is about 6%. They have had over 40 consecutive yearly common stock dividends INCREASES. There is some good quality up North and most actually have bought up various US utes also.
                I have found out Form 1116 is easy with Turbo, so there are no restrictions on me now buying. I owe too much taxes yearly now anyways, so this will help prepay it.

                1. Grid,
                  Going to have to re-visit the ENBs. Have to confess the 1116 was a roadblock. Easy to envision holding until 2nd reset and like you said, consistently raised dividends say a lot about the underlying. BTW – that small-slug of mad-money PCG…it doubled in a week, but instead of selling sold a 10-day call against it for an instant 15%. I’m banking on a volatile 2 years in Chapter 11 and possible diminished but saved common because CA cannot afford to take it on, nor the fallout from PGE pensioners or CALPERS.

                  1. Alpha
                    Congrats on the PCG. That little voice in my head wouldn’t let me go there. I think your 2 years vision has a guarantee and I’m rooting for your good ending. Really, really glad to hear you didn’t sell those calls, that would have been taking most of the risk and selling any profits cheap. On the other hand selling some puts along the way…..

                    1. P
                      Keeping my flak jacket on with PCG – usually much more conservative but it became a “go for it” buy based on big behind the scenes players that will fight the BK. It’s not investible but using the volatility to create an ultra high-yielder (an inside divvy program) while the tug of war plays out. After it doubled, sold the first 10-day call for an instant 7%, or 14% of invested amount. It’s a 3D flip that just keeps rolling albeit with more risk. And yes P agree never sell uncovered calls. As you know, you can lose you shirt in about 3 seconds if you don’t know what you’re doing with these. Still very much value the core holdings that allow for this occasional loco-trading. As long as the enthusiasm doesn’t morph into a Major Kong ride.

          2. P
            All good points. The alternate reality for us – crazy as it sounds – is that rates may continue to decline and we’ll be beach-chairing it for a while. One more reason December was a home run. But you’re 100% correct, selling without something on deck could be a problem – plus the tax consequences. When received as QDI or LT gains, the income is considerably less expensive than short-term selling.

            1. Very true Alpha. I generally try to always stay invested (just me as I have a pension) but I try to bend the yield curve of preferreds to suite my needs. Current macro issues aside, long term the risk owning perpetuals is more being wrong on rates rising than lowering. Its a shame the US QDI preferred industry is basically arcane in its offerings be it basically perpetual fixed, or perpetual and Libor plus spread.
              Canada is so much more progressive to preferred owners. Many companies offer several options on the yield curve. I have one Canadian ute preferred just purchased that is BBB+ (that is extremely high for an individual issue due to slot ratings as the bonds are A rated) now that is 5 yr Canadian Tbill plus 3.69% spread. But is also has a guaranteed 4.5% floor also. Quality US issued preferreds generally wont provide upside protection and downside protection. Additionally the Canadian reset preferreds offer the shareholders at reset date to move by vote from 5 yr tbill to 3 month tbill if it benefits them.

  3. All of the ‘new’ 6%’ish issues are raging like CA wildfires.
    BAC-B
    COF-P
    CFG-D
    JPM-C
    NI-B

    Glad I went deep into all of them when they started trading below/near par. Have also been taking a dip in the KTBA and DKT pools also. KTBA has recovered nicely from the down-draft last month – as have all the aforementioned.

    Saddened to see my C-L and JPM-B being called within this last month. Rotating into ALL-E, which is also up on the chopping block in a few months, but yields almost the same.

    1. A4I, getting harder to hide out isnt it…I couldnt commit fully to using all NI-B proceeds to north of the border, so I basically am playing same trade you are with ALL-B…I used leftover cash from reset purchases to buy 19 more shares of MTB-C at $1002.50 today on exD date. The MTB preferreds have basically become my hunker down money and I have a lot (for me) hunkering down in the MTB preferreds.

      1. Grid
        I just picked some MTB up today at par. I’m done because I believe those are callable? I don’t want to be stuck with finding a home for much cash (right now).

        1. P, Vanguard is where most of my MTBs are at and they have always got me in good price. Crap TradeKing was where my free cash was so I was trying to buy there and was getting bumped left and right including sells below me and above. Finally the ask dropped to $1002.50 so I bought at ask because they werent getting bought from this dump brokerage on a bid.
          And yes these are very much in danger of redemption notice. Especially when next yearly capital approval notices come from Feds that MTB submits annually. So if one was looking for a long term home for dough, I wouldnt look here first. For this money, I am fine riding tight to par from call fear and hold until redemption. And if it stays outstanding at over 6% QDI I am fine there also.

      2. I’m with you Gridbird, I also snagged some MTB-C today at about the same price. Seems better to put money there at the moment than in the money market, even if it is called. And if it isn’t called that’s good to.

        1. Mikeo in terms of safety, yield , and price stability there isnt a better bank preferred on the market for me anyways. For ones seeking duration safety, meh, not so much. I have MTB bank tellers failing out my ears. This is the biggest one company holding I have ever had. It wont stay that way, but until I can find better deals and hopefully in utility sector I will sit and hide there with that money.

    2. A4I, wow NI-B exploded to around $27.30. Up about 80 cents. Incredible…I sold too early today, but I wont complain with the $2 plus cap gain. Still this is very odd for such a liquid issue.

  4. Are money market funds bought and sold like mutual funds? Any restrictions? Yes market is very strong.

    Good day 🌴

    1. Tech guy–all money markets trade at $1/share. Yes with etrade it is end of day buy and sell just like a mutual fund. eTrade does charge me $5 on a sale. Fido ready reserves is simply a cash sweep and no charges apply.

      1. Tim,

        Seems to be some heavy volume preferred rebalancing at the end of day at the end of the month?

        1. Yep, great opportunity early in AH on some issues. GLOP-A etc. big dump near close on several issues.

          1. Yes, some great opportunities to swap issues. E.g. GLOP-C to A. Had to be quick and nimble though in last 10 minutes of trading.

          2. What happened at the end of the trading day? Several drops without a reason all in the last trades.
            Some sort of rebalancing at the end of the month?

            1. One of my finance buddies thinks it was a PFF Rebalance.

              Hang, that swap was a no-brainer. Lot of weird action at close.

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