Last week ended on a mild note with Friday being a down day, but it was calm and orderly-just the kind of day we like.
Last week the DJIA traded in a range of about 23,740 to 24,600 which is a pretty large range, but less volatile than the 1200 point range the week before.
The 10 year treasury traded in a range of 2.77% to 2.84% closing the week at 2.83%. The Treasury conducted numerous bill, note and bond auctions and almost all of them came off weak, but at high yields that were only a tiny bit higher. The Fed ran off only $3 billion from the balance sheet which leaves them behind the 8 ball relative to letting $30 billion a month runoff–with the March shortfall of runoff the Fed is now at $41 in runoff yet to be accomplished in April–we think they have slowed on the plan as it is likely not reasonable to do $41 billion in 2 weeks. Of course the runoff doesn’t come in a straight line.
This week there isn’t any economic news that is likely to move the needle much at all. The biggest economic item this week is that Fed presidents are giving 10 speeches–this always leaves open possibilities of ‘speaking out of school’ items.
It is interesting that the average $25 preferred stock and baby bond price fell by just 4 cents to $25/share and there are 198 $25 issues selling for under $25. This has been really stable for the last 2 weeks. Of course averages are hugely meaningless, but it does serve to show the relatively stability in this particular marketplace—for now.
Only 1 new issue was announced last week and that is from OFS Capital (NASDAQ:OFS) which announced a baby bond which priced at 6.375%. The issue matures in 2025. OFS Capital is a smallish business development company which has reasonable financials. We wrote yesterday about some observations on the company. We intend to purchase some shares of this offering as we really need to get some short maturity issues purchased for the Medium Duration Income Portfolio. This issue should begin to trade this week under the ticker OFSL–there will be no OTC Grey Market trading.
Below are a couple of new issues from recents weeks.
CAI International is a large shipping container and rail car lessor which launched a 8.50% fixed-to-floating preferred. The issue could have been bought for $24.60 and now it is a buck higher–would have been a good flip for sure.
Compass Diversified is a diversified manufacturer which sold a 7.875% fixed-to-floating issue which has traded poorly right from the start. The company issues a K-1.
It is quite amazing how differently 2 companies can be viewed by investors.