Preferreds Getting Smacked Down Hard

With rates popping even higher than earlier (now at 3.16%)  today a huge number of the preferred issues outstanding are getting hammered down 1% to as much as 4%.  We haven’t seen this much red for quite a few months.

We had noted that we watch the smackdown here–where we have all $25 preferreds with real time sorting of losses (and gains).  The list has been dominated by quality issues for the last week or so (or by the hated AmTrust Financial and Maiden Holdings issues)–but right now it has all sorts of issues down fairly hard.

At this point we wouldn’t call this a buying point–no doubt there will be quite a few losses yet this year–but a key factor will be the employment report this Friday and the wage component–we shall watch.

16 thoughts on “Preferreds Getting Smacked Down Hard”

  1. I may have pulled the trigger on NNN-F and FRT-C a little early, but who could tell? As Tim has said, the economic signals don’t matter – until they do matter. I’m still pleased with the yield I have and will hold. I’d rather have the solid income at a good price than possibly missing out on it altogether waiting for a price which never comes. I appreciate all the insight evident here about how this might play out.

    The fixed-to-float pfds I’m watching aren’t coming down much, if at all. Likewise for good ETDs.

  2. It appears that preferreds are taking a beating again today, and I note that high quality issues like PSA and PSB are being hit especially hard. Some of these issues with rates below 6% could be hit very hard over the next couple of months. NNN-F is trading right around $21.50 today.

    1. This is why I when I buy th higher quality ones, I chase the above market yield, above par…Perfect example now is my AGO-B ….It is down 0.22% last 5 days (barely blinked so far)…Its equal standing sister AGO-F is down 2.67% in last 5 days….Plus I have 90 extra basis points in yield also.

  3. I like higher rates. I don’t worry about the hit to my current holdings but I do like being able to lock in higher rates on future investments. I’m playing the long game as a retiree so let’s keep those rates rising.

  4. The bond market never priced in the December rate hike ( they didn’t seem to believe the Fed). It looks to me as if they may price in December’s hike as well as 2 for 2019. We may have a long way to go. Let’s see 3 0.25% hikes, 2018 prior high was 3.1%, we may be headed for 3.5%-3.75% if they price in 1 for 2018 and 2 for 2019. Enough to trigger an economic slowdown in my humble opinion.

    Anybody else have any thoughts as to where the 10 year is headed with this “rate tantrum” ?

    1. The fed forecast for 2019 is actually 3 rate hikes. I don’t think the bond market will price in all 3 at this point but to me it is almost a given to price in at least 1 but more likely 2 so they sit right in the middle of the 2019 forecast

    2. Ain’t that the million dollar question. If the Fed chickens out and backs off the rate hikes (or just 1 more) then this will have been a great buying opportunity.

      But if they do like Powell suggests rates are going higher and FI prices lower. It’s all a matter of reading Powell.

      I can’t figure it out so I’m splitting the baby. Been buying heavily today but leaving a lot of cash in MINT just in case.

  5. Any thoughts on why GLP-A taking such a beating today? I mean with the fat dividend and attractive ftf feature, seems like it would hang in there better than it did today.

    1. 6 times daily trading volume it got swamped. An article just last week was projecting a nice earnings increase from last year. It just could have got dumped on…I actually saw some very decent preferreds tank hard and recover some late in day. Barring something unknown it has to be a dump or advance leak of another preferred coming to market again. Be interesting to see the next few days. Personally I am not worried holding my shares, but not a buyer again as I have reached my K-1 limit. So hold I will…

  6. Great news. I’ve been sitting with a lot of cash waiting for FI to go on sale. Hope we are 3.5 soon.

  7. Yeah, Tim, thanks for all the great info. Any thoughts on GOODO and GOODP? I’ve held them for a while but they seem pricey in the current market.

  8. Tim, really appreciate your commentary and insight, especially as the market appears to shift seriously. Many thanks.

Leave a Reply

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