Another week starts with the likely news of the week being tariffs and the Supreme Court nomination. Everything thing else will likely take a backseat.
Last week we had a 10 year treasury which traded in a relatively narrow range of 2.81% to 2.87% before closing the week at 2.83%. As long as global fears remain in the world over tariffs and trade wars investors are more than happy to invest in the safe haven marketplace. At this point in time it would appear that only a sharp spike in inflation (at the consumer level) is likely to get long rates higher.
For the coming week we have 7 Fed president speeches–in the past they were meaningful for the way they jerked the marketplace around with conflicting statements–now no one seems to care. Monday we have consumer credit being announced and on Tuesday we have the JOLTs (job openings and turnover) report. Likely these are of little importance to the marketplace although a large change in the job openings could matter–but it has been running over 6 million openings and the odds that it has changed greatly in a month is not very high–although last Friday with the unemployment rate jumping as more folks enter the job market theoretically more jobs are being filled–we shall see. Also on Tuesday we have producer prices being released–while inflation is a market concern it is not likely that producer prices are the number investors key in on. Consumer price index (CPI) is released on Thursday and this is probably the only important report of the week for investors–a big spike here would get the attention of the bond market–and thus the equity markets.
The Fed balance sheet ran off by a relatively huge $16 billion last week. This is one of the largest runoffs we have seen since they began the runoff. This is demand that has been pulled out of the government and mortgage security marketplace. It will continue to be interesting to see the months ahead.
We had only 1 new issue announced and priced last week and that was the new Term Preferred from the Priority Income Fund. While we love term preferreds all of the readers are very negative on this issue. We had time to glance at the issue and it looks like we have no real interest in it—the non traded fund only releases Net Asset Values on a irregular basis and the fees they charge investors are sky high. The bottom line is that these Term Preferreds will probably perform ok over the long term, but are highly susceptible to surprises. We will try to review more in depth this week some time.
The average preferred share last week jumped 16 cents last week while the number of issues trading under $25 fell sharply to just 140 issues. This is the strongest week by far that we have seen in months.