Monday Morning Kickoff

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.








6 thoughts on “Monday Morning Kickoff”

  1. Tim, here is you a “scrape the nickels off the floor “ trade…. I just bought 500 shares of CTWSP this morning at $16.25. It goes exD 22.5 Thursday. The company is merging with San Jose Water with merger wrapped up by year end. Company already stated the two old tiny preferreds would be called. So I will collect the coins until it does. I bought an even more illiquid sister CTWSO (but only 99 shares, bummer) at 19.95. Its call price is $21. I already had 1500 shares of this issue purchased a few years ago at $14.50 and $15.50.

    1. Not too much liquidity there–I could buy it at 18.25, but will pass at that price.

      1. No, dont pay that, Tim….Thats a fleece…CTWSP will most likely be called at years end…Par is $16…A big call loss would occur buying at $18. …These were old tiny 1956 issued water preferreds. I have 10% of the float alone in CTWSO as only 15,000 were issued…CTWSP is a smidge bigger. CTWSO has the par $21…But it has traded only twice in past year or so… And that is including my added 99 shares, lol….

        1. No problem–if I can’t get it at 16.25 or so I wouldn’t touch it. But if I were you I would put in a GTC sell at $17.

  2. Hey Grid–that is my type of trade and I will check it out. This is exactly why I am holding my Arbor baby bonds to the end (4/27)–picking up those extra nickels was the lowest risk trade I could see.

    1. Tim, CTWSP is one of those small window opportunities. If you cant get around $16 par its just not going to have anything for you since merger is planned to be complete at years end.

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