Slipping and Sliding Into the Weekend

The weather is lousy in Minnesota with a big snowstorm and high winds forecast–I hate this weather–guess I need to go to AZ on a permanent basis. Oh well, guess I am stuck here with my wife who isn’t likely to move 1000 miles away from the grandkids. So I will just take a look at markets and see if there is any cheer there.

After the December holidays the new issue market doesn’t seem to be very active–am sure it will change. This week we had the new 4.75% perpetual priced by Wells Fargo (which I bought for hopefully a steak dinner flip–won’t hold too long) and the Triton International 6.875% perpetual, which I had hoped to buy, but decided not to chase it as it opened high and has traded in the 25.28 to 25.50 area.

Some folks on the Reader Initiated Alert page have noted that Seaspan (SSW) is going to delist their 7.25% baby bonds (SSWA) and plans to call them on 10/10/2020. Seaspan is doing some reorganization into a holding company structure. The press release is here.

The Fed has done relatively normal type REPO operations the last couple of days. Yesterday they did $39 billion in an overnight operation as well as a $35 billion term operation (14 day). Today they did a $53 billion 4 day operation (because of Martin Luther King day on Monday). As I noted earlier in the week the REPO plans for the next month were released and beyond a $5 billion reduction in the 14 day operation mid February it looks like liquidity will continue to be required at the levels we have seen in the last month or two.

The FED Balance Sheet data was released today and overall (REPO balances and FED buys/sells) the balance sheet grew by $26 billion in the last week–so ‘party on’ like its 1999. I didn’t think we would see multiple down weeks, because the ‘ball babies’ in stocks would cry.

Of course everybody is aware of the very low coupons we are seeing in the U.S.–but it is nothing compared to the rest of the globe. Giant self-storage company Public Storage (PSA) just sold a 500,000,000 Euro note with maturity in 2032 and a coupon of .875%–YIKES!! We are going to have to rewrite the playbook if this comes to the U.S.

At 1:30 PM CST we have the following pricing in preferreds and baby bonds. You can see that for the 1st time in 6 weeks $25 preferred stocks and baby bonds have tilted lower–not by much, although banking issues are off 5 cents in a week. Much of this downward tilt may be because we saw 72 issues go ex-dividend this week, but on the other hand we had big ex date weeks in December (for instance the end of December we had a week with about 130 issues going ex) that didn’t tilt the average price lower. So does this mean we have seen a peak? Guess we’ll know for sure in a few weeks.

23 thoughts on “Slipping and Sliding Into the Weekend”

  1. I feel for ya Tim, I don’t miss the winters of Nebraska. I escaped in ‘80 and ended up in DFW. I do miss the football. GO BIG RED. Thanks again for your site.

  2. I sold off my holdings of GOODN @ 27, and flipped them into GS/A @ 22.20. It has been a bit crazy as my favorite issue (ARR/B) hasn’t dropped back to LV as it has done so many times before. I was planning on picking up another 1500 this month but it just hasn’t fallen to my buy range. (Where so many issues are).

    1. Mrinprophet, I too sold my GOODN today at $27.11; I had a GTC order to sell at Vanguard and put a price that I never thought someone would pay. GOODN @ $27.11 has a 6.12% current yield and a lower YTC for a non rated perpetual preferred that is NOT eligible for a 15% tax rate.
      In Latin we say suum cuique
      We are all living in very interesting times, Nomad

  3. Hello
    Any insight into how the Seaspan re-organization will affect the common and/or preferreds?
    TIA

    1. I don’t have any insight other than what I’ve read–SSW is reorganizing with a holding company named Atlas Corp. (transforming itself into an Infrastructure Asset Manager) and bought APR, the world’s largest lessor of mobile gas turbines (all announced last November). Atlas will be the parent to both Seaspan and APR, essentially “bringing together” maritime and energy, though they will be operated separately.

      All the preferred SSW stock will be renamed Atlas. The one lone senior note, SSWA, will be delisted but will be called in October 2020. It’s all subject to shareholder approval in February. Nothing sounds nefarious to me, but maybe others know more.

      1. And for the Canada aficionados among us, Fairfax Financial Holdings in Toronto is the largest shareholder of both Seaspan (owns 36% of publicly traded shares) and APR (led a group of private equity firms to buy it in 2016). Fairfax owned 18% of APR when it was publicly traded and increased its stake to 49% in the buyout.
        Seaspan has raised about $1.5 billion in capital since the start of 2018 to shore up its balance sheet, $1 billion of which came from Fairfax Financial in three phases. The company is using that cash to repay some of its credit facilities to improve its financial flexibility.

        1. Say what? This seems like some very odd investment behavior for an insurance company. Any idea why FFH is investing heavily in container shipping? They’ve likely done well on the investment but seems way too risky for an insurance company.

          1. Landlord, They have an incredible amount of float money and such. Money will be apportioned in various risk profiles and of course they will have their needed safer bond money too. Here was last February shareholder annual summary. You will see a mention on page 8 to Seaspan. This type of company will have a wild ride variance in yearly profits and losses. Its the way its designed and of course claims factor in. In past half decade or so they have went from $70 or so a share yearly profit to losing over $30 a share. Its a roller coaster. Its really an insurance/investing vehicle. The legendary founder though has lost bit of his magic in recent time as it has sputtered a bit.
            Not enough to concern me. I dont care if common stock flops like a fish out of water. I just want to be paid my preferred money.
            https://s1.q4cdn.com/579586326/files/doc_financials/2019/2018-Shareholders-Letter.pdf

          2. Landlord, I don’t have the answer to your question, but Fairfax’s backing is undoubtedly a plus for SSW. SSW’s stock price for 52 weeks is up 56.44%, and in 2019 it beat estimates for Q2 and Q3. Insiders own about 29% of the stock, while institutional ownership is 48.60%.

            Preferreds will be renamed:
            SSW-D will be ATCO-D
            SSW-E will be ATCO-E
            SSW-G, will be ATCO-G
            SSW-PH will be ATCO-H
            and
            SSW-I will be ATCO-I

  4. Tim – the new charts you are publishing are precisely what the folks should be focused on: relative movements of treasury rates and prices of preferreds. You can really see how much the market has changed between the beginning of December and now.

    I’ve been doing essentially the same on Canadian issues but the numbers aren’t robust enough to publish. But the story is the same. Preferred have gotten expensive.

    1. I like visual data–I hope to add more. since I have sortable sheets I can do all sorts of things.

      It is amazing the change just in 6 weeks 3-4% higher than early december.

  5. Tim,

    Speaking of U.S. companies raising credit in Europe, I saw that CyrusOne also raised €500M recently at 1.45%.

    I wouldn’t be surprised and is now my base case that the U.S. would be lower for a much longer time than I thought possible. With a $trillion deficit and all levels swimming in debt, I can’t see how we would ever normalize back to 4%. I started seeing “lower forever” instead of “lower for longer” in the media.

    Happy weekend!

    1. Same to you Hster. Yes anyone with a ‘name’ is in Europe and Japan for debt–how can they not be (unfortuantely). Lower forever gives one a different outlook on the low coupons we are seeing–maybe one needs to back up the truck.

      1. Tim; I thought I would try one more time. Is there a way to call you with a couple of questions??? Looks like you are about the same age bracket as me. I’ve been buying bonds, preferreds, and Nebraska Muni’s now for around 49 years.

        1. Hi Chuck–don’t tell me you are a Cornhusker–for the first 20 years of my life I was a big Cornhusker fan being born and raised mostly in Council Bluffs/Omaha.

          I have to limit any individual stuff–mostly because volume it would end up being–I will have 16,000 users on the site this week (a new record).

          1. Hi Tim; I got it so you can erase it now. Iam going to send you an email with a couple of questions. THANK YOU. I was rooting for the VIKES in the playoffs. Sorry, they drew a tough one from the start. I actually am a “LIFE LONG CHIEFS FAN”. Had season tickets for many years. Not a huge Husker fan but still like them. TAKE CARE. CHUCK P

            1. Thanks Chuck–got it erased. Yes I know there are plenty of chiefs fan in the area. The Vikes aren’t ready fo prime time–they need some blocking. Oh well while I was a sports fan in my younger years I can now take it or leave it for the most part.

              1. Hi Tim; I sent you an email yesterday afternoon. Hopefully you have received it and will reply. THANK YOU. Chuck P

          2. Well hopefully Tim you werent a Husker fan when they screwed over my MU Tigers in ‘97 with that “kickball” touchdown. What a heart breaker. Anyhow, letting you know the LANDP experiment flip is largely over. Had close to 2000 shares at 25.60 range and sold all but 300 past 2 days in the 26.04-08 range. Worked out pretty much as planned…Just needed that exD date to post and then it was smooth sailing from there.

            1. Hey Grid, you need to come up with a new descriptor for a trade like that, definitely more than a steak dinner (unless you insist on VERY expensive wine with it) yet less than a top-tier 65″ TV. Congrats.

              1. Mikeo, yes, these are just easy money follow the chart trade. People were betting it would get redeemed with no divi declared. And I took the other side of the bet. It seemed a safe bet Land wasnt redeeming this go around.

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