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Monday Morning Kickoff

The S&P500 rose again last week – this time by 1.6% and once again right at new all time highs.

The 10 year treasury closed the week at 1.66% which was down about 7 basis points from the previous Friday, but up on the Thursday close by 5 basis points. Certainly there are ‘inflation expectations’ out there, but inflation is not showing up in the ‘official’ government numbers. The PCE, personal consumption expenditures price index, showed a gain of a measly 1.6% year over year.

The Federal Reserve balance sheet rose by another $26 billion as it continues the never-ending march higher.

The average $25/share preferred stock and baby bond rose 13 cents last week. This is the 4th week in a row prices rose as investors gain comfort with the current level of interest rates. Investment grade issues rose 16 cents, banks by 12 cents, mREITs by 13 cents and shippers by 17 cents. All of these income issues are at the highest prices since 2/2020.

Last week was a busy week for new income issues as 5 new issues priced.

Charles Schwab (SCHW) priced a new issue of non-cumulative preferred stock with a coupon of 4.45%. The issue is trading on the OTC grey market under temporary ticker SCHWL and closed on Friday at $25.04.

BDC Horizon Technology Finance (HRZN) price a new baby bond with a coupon of 4.875%. This issue is not yet trading, but should trade any day now.

Financial service firm B Riley Financial (RILY) priced a new baby bond with a coupon of 5.50% . This issue is not trading yet. Look for this one to trade in the next couple of days.

KKR Finance (non traded but a division of KKR & Co) priced a new issue of baby bonds with a coupon of 4.625%. This issue is not yet trading, but should trade this week sometime.

Closed end fund XAI Octagon Floating Rate & Alternative Income Term Trust (XFLT) sold a new ‘term preferred’ with a coupon of 6.50% and has a mandatory redemption in 2026. No OTC grey market ticker has been announced and we may see this issue start trading on the NYSE in the next day or two. Being a closed end fund this issue must maintain an asset coverage ratio of 200% or more.

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8 thoughts on “Monday Morning Kickoff”

  1. I guess I am never going to be aligned with the market’s thinking. Four years ago, I was convinced that massive spending was going to ignite inflation. The lesson I learned was to stop projecting and wait for the facts to prove/disapprove your opinion.

    Now, i am waiting or the facts to prove/disapprove inflation concerns. But the bond market sure is not waiting as the 10 year hits 1.75% interest. I guess somebody changed the rules and I missed the memo. Projections now matter more than facts (although I cannot find any credible concerning inflation projections).

    At some point the sub 4% yield on preferreds SHOULD (who knows) go up with the ten year at `1.75%. It is what it is.

  2. Washington Prime Group’s forbearance agreement with noteholders and lenders, which was set to expire on March 31, 2021, is being extended to April 14.
    With shopping mall tenants hurt by pandemic lockdowns, WPG skipped a $23.2M interest payment in February and entered talks to restructure its debt in mid-March.
    Last week, Bloomberg reported that the mall owner approached investors to gauge their interest in potentially providing $150M in bankruptcy financing.

  3. OFG-A. OFG-B and OFG-D Seven percent preferred issues of Puerto Rico’s
    second largest bank: CEO announced redemption this morning of all three issues.

      1. fabrib got this one first over in Reader Initiated….. Having played with BPOPP last year, you probably get a 480.6C form to deal with for your IRS pleasure if you play with these……

      2. Tim:

        I have looked at the First Bancorp preferred issues but have always held off since OFG and Banco Popular issues (which are still available with a face rate of 6.70 percent and 6.35 percent.) Are you bothered with their history of not paying preferred dividends from 2009 to 2016 and the non cumulative nature of bank issues such as their preferred stock issues? I have reviewed their financials again today and S & P reports them as moderate risk and moderate liquidity risk. I have been following you through your websites for over eight years and with the 90 issues I have bought, I have not had a dividend suspended or a company file bankruptcy due to careful analysis– My attorney, cpa and re broker training makes me naturally conservative in investing Its hard to trust management that suspended dividends for seven years as a gut reaction. As Warren Buffet states the number one rule of investing is do not lose money.

        1. Someone at this WEBsite (best in the world) posted FBPRM and FBPRL in Feb of this year. I remembered this Puerto Rican bank was deemed “safe” by one old SA writer, Rich Hills, who took enormous of time to study Q by Q, year by year plus market action and some financials and came up with his recommendation (at that time, it was more speculative as Puerto Rico suffered hurricane with no meaningful aids from the Feds. RIch Hills also studies TDS and USM, the unrated small communication play, double downgraded decades ago by Moody and SP but managed to stay whole pulling decent EBITDA income. I did a sloppy buy for the FBPRL and forgot that the dividend was MONTHLY. Luckily, I sold some and got very little cap loss because apparently there are people who did not compute either (LOL). I bought FBPRM, perhaps paid a little too much but the coupon is considerably better. I still have some FBPRL left. WIth the Fed rates holding low all the high yield ones came up nicely, including DLNG-B, turning unrealized loss into unrealized gain. Richard Lejeune of SA must be very happy with all his PANIC buy lists. LOL. According to Fidelity, PBRPL has been paying dividend continually since July 2018 EXCEPT May 2020 (I assume that was the worst COVID storm). Vanguard news claim that the INCOME has been good in recent months. Yes the LINK provided by Tim was what prompted me to buy this Puerto Rican bank decent yield and QDI.

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