Monday Morning Kickoff

For the 2nd week in a row the DJIA moved in a relatively narrow range with a weekly high of 26,241 and a weekly low of 25,877

The 10 year treasury moved somewhat higher on the week. The low yield for the week was 2.63% and the high for the week was 2.76% which is where it ended on Friday.

The average preferred stock barely moved last week with the average share up 2 cents. There are now 206 issues of $25/share preferred stock trading at $25 or below.

The FED balance sheet fell by $7 billion which continues the runoff on the balance sheet. The balance sheet fell $47 billion the week before so there is no let up in the runoff—on average.

Last week we had 4 new income issues priced.

Brunswick Corp (NYSE:BC) priced a new baby bond with a coupon of 6.375%. This issue is investment grade and has a maturity date in 2049. We have yet to see any trading in this new issue.

Giant aircraft lessor, Air Lease (NYSE:AL) sold a new fixed to floating rate preferred with an initial coupon of 6.15%. The issue is rated BB+ by Standand and Poors and Fitch. This is a substandard coupon, but investors of course buy it like they do almost everything else as it is trading on the OTC Grey market under ticker ALSCP at $25.33. The issue switches it floating rate in 2024 with a 3 monlth Libor plus 3.65% rate.

mREIT AGNC Investment (NASDAQ:AGNC) sold a new fixed to floating rate issue with a initial coupon of 6.875% which switches to floating rate in 2024 with a coupon of 3 month Libor plus a spread of 4.332%. Again these coupons are pretty darned low for an unrated mREIT. The issue is trading on the OTC Grey market under the ticker AGNCO and last traded at $24.90.

Lastly giant Self Storage REIT Public Storage (NYSE:PSA) sold a new preferred with a fixed coupon of 5.60%. The issue is strongly investment grade and might fit the portfolio needs of some conservative income investors. This low coupon leaves the issue open to share price erosion if high interest rates come to pass–yet the safety of dividend is very strong. The issue is trading on the OTC Grey market under the ticker PSALL and last traded at $25.17.

Investors should note that all of these issuers, except Air Lease, have other income issues outstanding which may be preferred to the new issue and they should check those issues to decide which is most beneficial to them.

6 thoughts on “Monday Morning Kickoff”

  1. I plan to switch things up a bit and instead of using KYN-F for my “cash holding area”, I am moving $ to PSALL. Seems safer to me and earns a lot more while I wait. Both are super liquid, so an argument can be made for whichever one you want to hide out in. But, if I’m hiding, why not pickup a few more nickels in the dark?

    1. Affinity – I’d love to hear more of your rationale on this idea. It looks to me as though PSALL is a plain vanilla investment grade perpetual and yet you’re comparing it to a 1 year piece of paper. For safety of principal, that seems like an unfair comparison. For hiding out purposes counted in terms of a couple of upcoming months or so, I suppose I can see it, but still, a plain vanilla perpetual ought to swing in either directions to a greater degree than KYN-F over any short term period of time..

    2. Affinity4Investing–that is fine if you expect perfectly flat to down interest rates.

      KYN-F has the redemption coming up next year so is near guaranteed for $25 price–and will trade plus or minus 10 cents until them.

      1. I’ll continue to hold both and wasn’t suggesting anyone else make any moves… I do expect rates to remain steady with one or two more increases. Nothing the market can’t handle if enacted in a way that is unlike the ridiculousness that we have seen the past year or so.

        All of the money redeemed by the called PSA issue will need to have a new home and the super strong IG ratings of PSALL will be enticing. Sure, nobody likes seeing the yield shrunk, but this is the reality of where we know we are. Across the board, we know we’re seeing old issues replaced with ones that have lower yields (in most cases).

        “an argument can be made for whichever one you want to hide out in”… definitions of “plain vanilla” vary, I’m sure. Geesh…

    1. Thanks Don–sometimes I do things that I think are helpful–and they aren’t. Many times I am thinking of newbies who may need more explanation than many of us do.

Leave a Reply

Your email address will not be published. Required fields are marked *