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Monday Morning Kickoff

Last week the S&P500 rose by 1.4% which is a decent performance on a week with a Fed rate hike and this is actually the second week in a row with a 1.4% gain.

The 10 year treasury gyrated around before closing the week at 3.38%. Trading was in the 3.30% to 3.64% range, but because of a continuing rush to safety we see low rates. Seems to me we may have the low yield in place as yields are likely to start moving higher as the slow confidence building in the banking system continues—of course whether the confidence continues to build is dependent on whether we see more banks fail–we’ll see.

This week we have plenty of economic news to drive markets around–the big one is the PCE (personal consumption expenditures) on Friday since this is one of Jay Powell’s favorites (or so it is said) for indications of inflation.

As I mentioned last week the Fed balance sheet grew by $94 billion last week – so in 2 weeks we have grown the assets by just shy of $400 billion. This makes for an interesting chart–showing the peak balance sheet and the spike from levels reached as the FED implemented quantitative tightening.

This chart shows the Fed balance sheet from 18 months ago to last week.

Last week the average $25/share preferred stock and baby bond fell by 19 cents. Interestingly investment grade issue caught a bid and rose by 17 cents. Banking issues fell by 17 cents, mREITs fell by 9 cents, shippers fell by 18 cents, but CEF preferreds rose a dime.

Last week we had no new income issues price.

8 thoughts on “Monday Morning Kickoff”

  1. Does anyone know what will happen with First Republic’s Preferred Shares FRC PR J and FRC PR M? As far as I know they have suspended dividends.

    No more Non Cumulative preferred shares.

    1. Geoffrey –
      As far as I know, FRC’s Board has only announced suspension of common dividend, though from the pricing of preferreds, if they have not already suspended payment on them, the market prices they will be suspended soon enough if not already. Moody’s, if I remember correctly, has downgraded the preferreds to CCC.

      1. Thanks for your response Fan59. Emails to FRC have not been answered. No surprise there. I see the preferreds as well as the common stock is still trading. The question here is do I bail out or wait for more information?

      2. Fan59, Do you know what happens to preferred shares if FRC Bank is sold to another financial institution? Does the new institution take on the liability as well as the assets?

    1. Well we got it as my spreadsheet says my preferreds up 1% today. Now the hard part seeing if it sticks. That is more problematic. I bought some WAL-A post market Friday at $12 and see its around $13 so far. Probably should sell again. Just bought some JXN-A myself at 21.25 though its not really enjoying any morning pop.

        1. No the shares outstanding is correct at 12 million. I would assume the 10 day volume is correct also, though dissipating some today. Remember WAL is just a bit off center from ground zero here. Right along rubbing shoulders with PacWest. This was a just a snap back bounce play for me. Wont keep this long. In fact I have sold off some of the bank dog bounce backs already. I pretty much had to when I bought JXN-A this morning to keep sector risk in line.
          I like small ball too. ALL- B last week went up near 25.70 and too high so I dumped them and now bought them back today being they are now in 25.40s and effectively back under par since it goes exD this week.

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