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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.

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