The S&P500 had a low last week of 3420 and a high of 3502 (just 2.5% from a 52 week high) before closing the week at 3465 which is a loss of about 1/2% on the week–on a relative basis, a quiet week, as investors play the stimulus and election guessing game.
The 10 year treasury continued to creep slowly higher hitting a weekly high of .87% on Friday before backing off a bit to close the week at .84%. Back in June the rate had a spike high in the .90% area so certainly we could see rates bust through this area soon. The range for the week was .76% to .87%.
For some of us this is a bit of a dicey time–low coupon issues would be hurt the most if we were to see rates move above 1%. Remember that ‘speed kills’–a move higher, which is slow–a few basis points a day (or some such move) would be better tolerated that a spike of 10-15 basis points in a day. We don’t ever know the tolerance of income investors for higher rates–but these fast moves can set off some selling. Additionally, it is my understanding that there is a lot of speculation in the interest rates markets based on potential outcomes of the elections–these trades can always be reversed to send rates higher or lower.
The Fed balance sheet grew once again last week with assets expanding by $26 billion after growing by $18 billion the week before–the balance sheet is now at a record high of $7.177 trillion –the previous high of $7.168 trillion was back in early June, before assets dipped down to $6.920 trillion in early July.
The average $25 preferred stock and baby bond rose by 8 cents last week. CEF preferreds were off 7 cents, utility issues were up 11 cents, banks up 4 cents and investment grade were up 9 cents–no giant sector movers last week.
Last week was a bit more active in the new issue marketplace as we had 4 new issues come to market, with an additional preferred issue from Gladstone Land being listed.
Quality banker U.S. Bancorp (UBS) sold a 3.75% non cumulative preferred which is now trading under OTC ticker UBKPL and closed last week at $24.68.
Banker Wells Fargo & Company (WFC) priced their new issue of preferred stock at 4.70%. The issue is trading under OTC ticker WFCCL and closed the week at $25.17.
Leasing company General Finance (GFN) sold a new issue of baby bonds to refinance an old issue. The issue priced at 7.875% and as of yet it hasn’t traded.
Pennnsylvania banker Fulton Financial (FULT) sold a low investment grade issue with a coupon of 5.125%. This is the star new issue of the week as it came out of the gate hot hitting a high of $25.70 on the 1st day of trading before closing at $25.67. Shares are trading on the OTC grey market under temporary ticker FULPP.
