Each day that passes gives me a little more confidence that we may be near the end of the banking crisis—not there, but getting nearer. Of course we always have plenty of issues to worry about–the debt ceiling and government spending, but let’s face it we won’t have a time where we can’t find something to worry about.
Last night I was working on the fixed-to-floating rate preferred stock page and noting the great bargains that are out there–or should I say ‘potential’ bargains. 3 issues in particular caught my eye. Valley National 5.50% FTF (VLYPO) with a current coupon of 8.91%, current yield of 12.05% and of course a yield to worst of over 26%. Zions Bancorp 6.3% FTF (ZIONO) with a current coupon of 9.58%, current yield of 11.79% and yield to worst in the 20% area. Lastly the Goldman Sachs 5.50% FTF (GS-J) with a coupon of 8.98%, current yield of 8.99%, but with much more safety has a yield to worst of just around 9%–I suspect this issue will be called soon. NOTE–the FTF spreadsheet calculates the coupon with real time 3 month libor–the GS issue just became floating so no dividend has been paid since entering the floating rate period. The spreadsheet calculates the ‘potential’ coupon–the actual coupon only is known on the dividend determination date for each issue.
I am not recommending anyone buy any issue mentioned here–but I may just nibble in a very small way before the week is out.
Interest rates are still quiet today–3.51% on the 10 year treasury this morning–not much movement this week and this will probably remain true through the end of the week. Next week we have more consequential economic news so markets should move. We have Powell’s favored inflation gauge on the 26th (Friday)–personal consumption expenditures (PCE) data and with the FOMC meeting approaching that will be a huge number.
So let’s get going on the day.
Tim.. The bargain hunters are back……………But ,we where buying all along.
.Georges
Tim was right, the entire list has been a good source of ideas. In the last hour many spiked pretty good. Like over a dollar.
What does confuse me is why some 6s are holding up better then the 7’s! In MS their fixed to floats are close to par. The P is over 26? I guess the thought is that holders of the (formerly) fixed to floats are dumping because of duration changes/model parameters. Or maybe because of the near term call date. Still 6 7/8 and 7 1/8 at less than 25 (backing off accrued) pretty attractive.
Then you add in ALL new issue at 7 3/8. I can’t make hide nor hair out of that high rate? Doesn’t make much sense they paid up like that??
@Charles M
As you know, the bonds for First Republic were zero’ed out in the JPM acquisition so no guarantee that the bonds of the banks mentioned here are any safe than the preferreds.
Gunfighter, no disagreement from me. Before it looked like the troubles would spread to other regionals, I thought the drop in Zion was an opportunity to grab a bond or two of theirs.
But I agree with Alpha, with what we’ve seen lately that ratings don’t mean much and runs can happen overnight, I backed off on banks preferred and even mentioned I sold off some at a loss to preserve capital not knowing where some of these are going.
I just mentioned the bonds for the more adventurous here.
I do continue to hold the ZIONL and O as I am willing to take a chance they survive, but I am not buying more to average down as I normally would. Although I might risk it to flip one or two like Grid has been doing
For playing in the higher risk bank stocks the ZIONL will be called 2028 if it survives that is of some comfort. I have a small holding that I am too underwater with to sell. If it goes to zero, my profits will cover the loss.
Or you can look at several of their bonds like this one
CUSIP 98971DAB6
Yes Charles – the ZIONL is a great pick.
You know Tim, I sometimes wonder if we move the market on some of these stocks talking about them here.
Both ZIONL and NYCB-PU up big this morning. Should of waited longer to flip those shares
Charles–we can move the market in these thinly trade issues–unfortunately zionl jumped without me on board.
With Arbitrage Trader jumping in as well – he is a reputable known writer.
Arb is back in VLY preferred? I see he lost a bit on VLYPP. I bought VLYPO last week @15.22. Not in size though.
Hi, Tim
Thanks for your great work!
Just a few notes on the picks.
ZIONL might be the better choice in both yield and credibility, compared to ZIONO. There are also 2 OTC Ftof from ZION that are priced better than ZIONO
VLYPP compared to VLYPO at current prices has a higher PV and is also quite mispriced to VLYPO.
You may want to check these out as well
Hi AT – thanks for the suggestion – I do like the baby bond ZIONL, but was looking at my FTF page which covers just the preferreds, but certainly the baby bond is a super option.