Monday Morning Kickoff

Wow–here we go!!

The S&P 500 opened last Monday at 3258, after closing the Friday before at 3338 and fell as low as 2856 on Friday before launching a fairly furious rally the last 30 minutes of Friday to close the week at 2954–a weekly loss of 385 points.

The 10 year treasury closed the week 1.12%, this is easily a record low.

Amazingly the Fed Balance Sheet fell by $13 Billion as no additional liquidity was added via repo operations or via QE (quantative easing) purchases.

Last week we had just 1 new income issue sold.

mREIT MFA Financial (MFA) sold a new issue of fixed-to-floating rate perpetual preferred with an intial fixed rate coupon of 6.50%. The issue is trading on the OTC Grey market now and closed Friday at $24.22.

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The average $25/shares issue lost 79 cents for the entire week. Investment grade preferred were off 66 cents. The chart below is truly ugly–most of the losses were incurred on Thursday and Friday.

5 thoughts on “Monday Morning Kickoff”

  1. To heck with treasuries. When I can pickup PSA-D (Moody’s A3) at $25 and a 4.95% coupon, I don’t care where the market is headed in the short term.

  2. Tim, I panicked in December for a reason i’ve forgotten already.
    Now that we are being flogged, i find myself rationally and calmly trying to come up with a plan. You mentioned a BUY list, but is there a BYE list as well?

    1. You have a very good way to describe the current situation.

      Yes, we should all start using this draw-down to evaluate what you own and perhaps mark what in our holdings performed poorly v/s others. In my case, what I though was ‘better’ and higher quality declined a bigger % than the more junky recently bought new IPOed issues at sub-$25.

      I am still amazed at the almost 10% decline in quality CEF such as FFC that I bought back into halfway thru the decline thinking ‘good price’… In retrospect, guess should have waited for even a better price!

  3. Tim, I think they kick start that repo operation this week, lol. The yield on the 2 year treasury was at .76% this morning. With the fed fund rate at 1.62% they need to get it below the 2y. Grab yield while you can!

  4. It will be interesting to see the peak to trough duration of this correction. It appears to me that the velocity of market moves has increased, perhaps due to technology and/or structure of the exchanges themselves. Historically, I start buying too early (story of my life).

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