The S&P 500 opened last week at 2951 while it closed the week at 2941. The range for the week was a bit above 1%—quiet—too quiet. But we see tonight (as we write) futures are up just shy of 1% based on China trade–we shall see where this goes.
Interest rates as expressed by the 10 year treasury opened the week at 2.03% and moved as high as 2.05% before closing the week right at 2%. You’ve got to know that it is going lower—short of a complete “buyers strike” the money sloshing around the world has no place else to go. Unfortunately the signs being given by global interest rates is quite ominous and likely is going to make us income investors miserable again in the not distant future as we have to start scratching everywhere to find a suitable reward for our investment.
The Fed balance sheet fell by a rather large $18 billion last week to $3.826 trillion from the $4.5 trillion peak which was 55 months ago. There were thoughts that the Fed would bring the balance sheet down to $3.75 trillion and then stop—that is only $51 billion away which means we will reach that point in the next month or so–our bet is they do not stop–that they continue to run off the balance sheet.
The average $25 preferred stock and baby bond actually moved lower by a few cents last week–doesn’t seem right, but it may have well been related to ex-dividend dates as we had over 100 issues go ex-dividend last Thursday and Friday. Don’t forget that we have a daily updated ex-dividend list that we keep for those interested in these things. You can find the listing here. We see there are 206 issues that are trading at $25 or less–last week there were 184 issues at $25 or under so we are certain this is distorted by the heavy ex dividend calendar.
There were 2 new income issues announced last week.
Banker Synovus Financial (NYSE:SNV) announced a fixed to floating rate issue that is fairly junky–a S&P rating of BB-. The initial coupon is 5.875% and the issue is trading under the OTC temporary ticker of SNYXP and it last traded at $25.37–obviously others like this better than I do.
mREIT New Residential Investment (NYSE:NRZ) sold a new fixed-to-floating rate preferred with an initial coupon of 7.50%. While we generally do not invest in mREIT securities we took a full position in this one at $24.94 and like many predicted the fairly tasty coupon couple with the 5.802% spread when it floats in 5 years appeared attractive to many and the issue traded to $25.40/share on the close Friday under OTC temporary ticker NRXPP. We targeted a 2% gain which is just pennies away, but we will stay aboard for a while longer as there is no use bailing on a rising price. We would expect to see some price “digestion” in the days ahead as some do bail out with 2% gains.