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Monday Morning Kickoff

Well it looks like we are going to see a soft start to the week with the S&P500 futures now off .75%.

Last week the S&P500 traded in a range of 4268 to 4513 before closing on a ugly note on Friday at 4271 which is 2.7% below the close the previous Fridays.

The 10 year treasury closed last week at 2.91% which is 9 basis points above the previous weeks close. Maybe we make an assault on 3% this week–or maybe it falls back–who knows?

The Fed balance sheet fell by $10 billion last week.

The $25/share preferreds and baby bonds took another drubbing last week. The average share fell by 28 cents. Investment grade issues fell by 40 cents , banking issues by 34 cents and mREIT issues by 15 cents.

Last week we had 1 new income issue price. Business development company Saratoga Investment Corp (SAR) priced a new baby bond with a coupon of 6%. This issue is not yet trading but should be either this week or early next week.

12 thoughts on “Monday Morning Kickoff”

  1. Question – hoping others will have an answer? SJI is going private, what happens to there Baby Bonds SJIJ? Will they trade on the pinksheets? Is this baby bond still a tradeable security?

    Decline alot to 18ish a share.

    thank you
    David M

    1. David,

      Gridbird has covered this very well and as always I appreciate his insights,

      Per Gridbird’s post…”Delisting and Deregistration of Company Securities
      If the Merger is completed, shares of our common stock, our subordinated notes and our corporate units will be delisted from the NYSE and deregistered under the Exchange Act”.

      SJIJ will either go to expert market or completely delist and be completely untradeable.

  2. CNBC reporter this morning was displaying areas of market where people were actually buying now. Two of them were MLP’s and oddly preferred stock was too. Of course it could be a particular subset such as floaters, as he didnt mention anything specifically about what type. I was very surprised to hear him say that, as they are rarely if ever mentioned to begin with.

    1. Gridbird and other investors. I think preferred stocks mentioned on CNBC, Fox Business and even Bloomberg occur about as often as a full solar eclipse. Gridbird and other investors, do you monitor the inflows and outflows of preferred stock funds like PFF? I do notice names that PFF holds in their September 2021 prospectus appear to correspond to healthy price reductions in these particular stocks in the last three months as opposed to more lightly traded preferred stocks that are not in their funds.

      1. Follow, this is how I managed to make good and easy coin in income area during 2013 Taper, 2016, Dec. 2018 spread blow out, and even March 2020.
        Illiquid OTC perpetuals are a non correlating asset within same asset class. I was selling these during above times and rolling into the roached out liquid issues. The old illiquids are not tethered to daily market movements.
        In this time period it worked the opposite. When liquids were starting to crumble from rate hikes this gave you time to get out of illiquids. So Im basically out of them other than a couple and a small amount of NEWEN I just bought yesterday. If you notice the illiquids are wanting to crumble but there just hasnt been any real amount of sellers yet. It will happen, more pain is coming there if present trends continue, it just needs time.
        Some people watch PFF and I appreciate the comments, but its pretty easy to know what is happening there.

        1. Why I’m not buying any perpetuals these days and why I’ve followed Grid out the illiquid door:
          Tables USD LIBOR interest rates – maturity 3 months
          Current interest rates
          april 25 2022 1.22486 %
          april 22 2022 1.21371 %
          april 21 2022 1.18400 %
          april 20 2022 1.13629 %
          april 19 2022 1.09829 %
          april 14 2022 1.06271 %
          april 13 2022 1.04429 %
          april 12 2022 1.03843 %
          april 11 2022 1.02143 %
          april 08 2022 1.01071 %
          april 07 2022 0.98886 %
          april 06 2022 0.98643 %

          First rate per month
          april 01 2022 0.96200 %
          march 01 2022 0.51086 %
          february 01 2022 0.30271 %
          january 04 2022 0.21600 %
          december 01 2021 0.17463 %
          november 01 2021 0.14088 %
          october 01 2021 0.13313 %
          september 01 2021 0.11888 %
          august 02 2021 0.12375 %
          july 01 2021 0.14475 %
          june 01 2021 0.12850 %
          may 04 2021 0.17538 %

          Seems pretty clear to me.


  3. I sold nearly all of my PFF put options on Friday (which felt like a mini wash-out day), so that likely means PFF has further to fall! Looking to get back in on any bounce, as the options market for PFF has become much more liquid in 2022.

    PFF had another monster $140M in outflows last week and now has accumulated $1.534 Billion in outflows year-to-date. PFF down 12% YTD in total return.

    So in the preferred space, selling certainly continues to beget selling.

  4. We actually had two OTC preferred issued by BAC and PNC also priced in last week, both around 6% with a 3% floater option (to 5 year treasuries) after 5 year.

    1. @Sumit Gupta or anyone have pricing / OTC tickers for these new BAC and PNC preferreds issued last week or so?

      1. Go to Edgar and look at the FWP/Filing for the terms and these are institutional issues that won’t trade listed or otc. They trade like a bond.

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