Monday Morning Kickoff (on Tuesday)

Well time to get another trading week underway. Last week we had the consumer price index (CPI) and the producer price index (PPI) released with the CPI showing inflation slightly hotter than expected and the PPI showing cooling inflation at the producer level. In spite of the numbers equities moved higher.

The S&P500 rose–this week by 1.8% from the previous Friday. The index traded in a range of 4699 to 4802 before closing at 4784.

The 10 treasury closed the week at 3.95% and traded in a range of 3.92% to 4.07%. Even a hot CPI couldn’t drive rates into the 4%s on the week. The 10 year treasury seems convinced ‘hot prices’ are in the rear view mirror.

The CME FedWatch tool predicts a 68% chance of a Fed Funds rate cut in March (and predicts a 5% chance of a cut yet this month). The tool had been between the low 60’s and low 70’s this week as various pieces of economic data were released.

This week we have lots of economic data–although the release of the Fed Beige book on Wednesday may garner the most attention as we get some anecdotal information from each Federal Reserve area.

The Fed balance sheet rose last week by $5 billion. The run off of the balance sheet has fallen behind the $95 billion/monthly rate target – I suspect we will see a giant drop in the next couple weeks to get it back on track.

The average $25/share preferred stock and baby bond moved nicely higher last week–up by 19 cents. Investment grade moved 27 cents/share higher, banks were up 30 cents, CEF preferreds were up 8 cents, mREIT preferreds up 3 cents higher and shippers up 22 cents.

Last week we had 1 new income issue priced–Eagle Point Credit Company (ECC) priced a new term preferred with a coupon of 8% and a mandatory redemption in 2029.