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Taking a Walk on the Wild Side

Well it isn’t really too much of a wild side walk but I have started to buy some preferred issues that I haven’t owned for a few years–still in my comfort zone, but dicier than owning utility and CEF preferreds and baby bonds.

Yesterday I started to add positions in the Eagle Point Credit (ECC) monthly paying 7.75% term preferred (ECCB) and Oxford Lane Capital (OXLC) 6.75% term preferred (OXLCM).

As most of you know these closed end funds invest entirely in CLO’s–collateralized debt obligations. These are not investments I really want to get into heavily, but it is all above risk and reward—and we all realize the reward has gotten pretty meager in investment grade issues—so here I am into higher risk issues.

It is my plan to simply hold these–in very limited quantity (a few hundred shares each) simply to help goose my dividends a bit. Given that they are term preferreds pricing should remain fairly flat until the next ‘tantrum’ or event and only God knows when this will happen.

The key with these issues is to watch the leverage–being organized as closed end funds they must maintain a 200% coverage ratio–this gives the senior security holders (preferreds and debt) some level of protection.

76 thoughts on “Taking a Walk on the Wild Side”

  1. Consider ECCY & ECCX the baby bonds of ECC. These 2 issues require a huge 300% asset coverage while ECCB is “only” 200%. At 300% that must be complied with quarterly, chance of loss is quite small in my view.

  2. Interesting thread below on IRA to Roth conversion on losers:
    Caveat: May want to use a new and SEGREGATED Roth account because:
    “…The 5-year rule on Roth conversions requires you to wait five years before withdrawing any converted balances — contributions or earnings — regardless of your age. If you take money out before the five years is up, you’ll have to pay a 10% penalty when you file your tax return.”

    1. Joel – What are you quoting from? Here I go again, trying to figure out what’s right on Roth conversion from IRA. What you’re quoting is what I originally thought was correct and, therefore too restrictive to consider – that when you convert IRA money to a Roth, you’re locking out access to the TOTAL amount placed in the Roth for the next 5 years…. Subsequently, I came to believe that that was a misinterpretation and that you always have penalty free access to your original principal deposited but you’re subject to penalties on withdrawals of appreciation or earnings for the first 5 years. Which is it??? The latter makes a whole lot more rational sense and the former way too draconian.

      1. To all concerned on this Roth withdrawal issue,” In retirement” It’s my understanding, your Roth should be your last remaining asset, being your most tax efficient vehicle. If I spend my last nickle and then qualify for medicaid It will come from my Roth.

      2. 2wr, …..under five years pay a 10% additional tax, it’s not a LOCK.
        – A segrated account just makes it easier for the brain and to prove if you ever are asked to deliver proof to the IRS. I have had to do this ( before a Marine Colonel N. who was trying to retire by finishing his Fed Govt years at the IRS audit team. I have to salute the flag everytime I say his name). All records and proof are on YOU.
        I also use the Account names or nicknames to title things like “JARoth Cov 20.” All these things can become crumbs and then rolled into a single Roth when the five years is up.
        Also, Zero Commission structure makes it easier to hold the same security in multiple accounts.
        Lastly, most brokerages allow for a consolidated view where the same securities in mutliple accounts are seen in a global view spreadsheet.
        I have LOVED the new e-brokerage sites since they were forced to govt accounting compliance and competition for services to clients.
        I like to Keep It Sweet and Simple.

  3. No “wildside” for this guy, finished up my year end tax planning including a Roth conversion. With the addition of a $75m CD maturing Monday We’ll be around 45% CASH, accross 4 accounts. No way I’d buy any 2% muni’s , 3% over priced dividend aristocrats,those high flying techs, or 4% preffered’s with “any” credit rating. Just waiting for January 1st to take some additional long term gains, I’ve maxed out for this year. When the Crap hits the fan, who knows, but I can sleep at night.

    1. Mike R – With $75 MILLION in CDs maturing on Monday, I can understand why there’s no need for you to be doing any wildside walking……. I am curious, though, about your decision to do a Roth conversion at this time…. Are you in your RMD years with your IRA? I am, and for probably no good reason whatsoever, I’ve never done a Roth conversion. At 74, I’ve been misinterpreting the limitations on penalty free withdrawals in newly converted Roths and had thought one was restricted on the whole amount placed in one for 5 years, but I now know that’s wrong. Given there’s no RMD withdrawal this year, I was considering taking the RMD withdrawal amount anyway and using it to create a Roth, however, given I’m in a position where, barring emergencies, I expect to never have to use my substantial IRA money and also that the estate should be in a range of value well below the minimum for tax free distribution to heirs, my thought was why pay the taxes at all if I don’t have to? I know Biden’s been talking of lowering the estate minimum drastically, but I’m thinking there’s far too much opposition for that to gain any traction. Any thoughts? This probably isn’t the right forum for this type of discussion (apologies, Tim), but what the hey… I hate tax planning and jumping thru hoops to do so and I fly solo (and blind) on this kind of stuff, so why not bring it up?

      1. 2 white roses, that’s $75, 000 not million. I wouldn’t be posting here if that was the case. as far as a roth conversion I’ve been doing those since I was 591`/2 to the limits of federal taxation I can. State tax is another issue you can’t get around. I’m 72 and congress gave everybody that gift again this year by not requiring RMD’s in 2020 every $ you can get in a roth is like a triple tax free muni in any asset you choose. And who know what tax rates will be going forward. Every bodies situation is different but this has worked for a poorboy like me.

      2. 2WR, the CARES act that passed this year made a change for how inherited IRA’s must be paid out, mostly to non-spousal beneficiaries. Let’s assume your IRA is going to your middle aged children. Before the CARES act, they could take IRA distributions every year based on their life expectancy, the so called ‘Stretch IRA.” The CARES act changed that it must be taken out over 10 years. So this might substantially increase the taxes for the children. There are a lot of exceptions and rules depending on each individuals circumstances. So you would want to verify anything thing you plan to do with a tax professional. But I know that many people have changed their IRA distribution plans because of the new rules. May or may not apply to you.

        1. Thanks Tex and Mike. Yes, I’m aware of the changes the CARES act passed regarding how inherited IRA’s now have to be paid out over 10 years, but to me, that’s an example of hoop jumping I don’t care much about…. I mean sure, it’s something my kids are going to have to deal with but in a sense it’s all found money to them so how far are you going to go to maximize what will probably be more than they expect in the first place? And as far as tax professionals, I always get the feeling that unless there’s some way to truly know the guy instead of picking one from the phone book, I just don’t think I’d trust one to hire… I feel more comfortable talking with my III friends/strangers than I would talking to a randomly chosen tax advisor stranger.. I guess I’m paying the price of not having any networking skills my whole life… lol And Mike, I was only joshing you about “million.” I was pretty sure that’s what you meant…. BTW, up until about 8 years ago, I had a high falutin’ NYC tax accountant…Now I have TurboT. I never did understand his reasoning, but he always concluded it wasn’t worth it for me to do a Roth…To this day I think he was wrong, but I think his rationale had to do with my conservative approach to what I expect to earn in my investments long term due to my conservative bend.

          1. 2WR, I assume most of us can do an adequate job of getting the IRA rules correct if we want to spend the time reading up on it. Some people who are plenty smart enough do not want to spend the time, so they should pay up for a professional instead of making a costly error. One size does not fit all.

            BTW, long term I suspect all ROTH distributions will be taxed in some form. So doing a lot of conversions might be for naught. We did a LOT of conversions back in March and April when prices were beaten down. And since nobody had to take a RMD from their IRA this year, you could just convert the same amount and have no tax consequences. You can still do that, you just don’t have as many beaten down prices as before.

        2. The cowardly Congress likes to sneak things like elimination of the stretch IRA into bills purporting to help the folks that have little chance of veto. The CARES Act was not the first and it won’t be the last.

          For what it’s worth, to me, the most compelling reason to do a Roth is higher tax rates down the road. When you do the spread sheet be sure you test at higher tax rates. I believe that we are looking at the lowest overall tax burden that we will see in the remainder of my life time.

          1. bob, agree 100% , I would ad this as another compelling reason for keeping
            Ira balances under control while maximizing roths, the taxation on up to 85% of your social security. “Social security tax trap” as you get older RMD continue to rise therefore increasing the tax you pay on SS, balances in your Roth effect nothing even upon withdrawal. I personally think that’s the direction being taken, to make all SS benefits taxable regardless “cementing” the double taxation, while bailing out the system.

          2. Do you really think that Roths will retain tax free forever status? Obama had a proposal that said the most one could have in a retirement account was enough to drive a life only annuity w a total payout of 2 million. Which is a lot less than 2 million dollars.

            I spoke with one actuarial who got red in the face responding to the insanity of the proposal. PLUS I’ve heard they are talking about going back to those ideas!!

            1. Agreed – I would not trust that Roth’s will retain their tax free status forever. When you have one party that wants to tax the hell out of everything in order to facilitate their crazy spending priorities, I suspect nothing is off the table.

              I personally would not trust that Roth’s will remain tax free forever for everyone

              1. Maverick, My take is yes “roths” may change for future savers, but a lot of folks, “one party” included placed trust in “that” promise since I believe 1999. A must is grandfathering accounts prior to any change. Short of that you have ultimate double taxation and essentially asset confiscation, the Supreme Court now in place would surely mandate as much. Other than that, we’re all down the rabbit hole.

              2. Mav – I’ll disagree with you on Roth taxation in one respect.

                The crazies won’t be taxing Roths to fund their spending. They just print money for that. We all know there is no harm in that.

                The mentality has changed. The “social justice” folks in D.C., which are many in numbers, and include the soon-to-be VP of the U.S., simply want to punish you. You worked hard, you saved, you were responsible, you need to be punished.

                PS – I don’t think Biden makes it through 2 terms and perhaps even one. He is either going to die in office (he is not a healthy man), or the senility will become such a problem that he will resign, or he will be pushed from office by his own party. From January 20th on, Biden is going to be under pressure to turn the job over to Harris.

                1. Bob

                  Thanks. One of my worries is just what you mentioned. We sadly have a group of politicians and people in this country who want to punish success. As you said – “You worked hard, you saved, you were responsible, you need to be punished.”

                  So if for example they are going to just transfer wealth by forgiving student loans (ignoring those people who were responsible who worked, saved, paid their debts) what is to stop them from screwing the same responsible people who saved by taxing Roth IRAs for example?

                  Once you start with that mindset, nothing is really off the table

              1. Well I actually agree with Bob… was just highlighting the risk. If I had to assign a Prop. it would only be be 15/85…

                I had someone discussing conversion like 10 years ago. It made sense evey way you examined it. I asked “Are you ready to write a check to the IRS for 350,000?”…..

              2. Mike, thanks for the article. While it does make good points, the bottom line is no one knows for sure and I am still skeptical.

                Yes, if they tax Roths they could grandfather in existing plans. However, there is no guarantee of that. Or they could just exempt the first $x in a Roth – under the “Tax the Rich” guise. Or they could tax it all. We saw the change they put in the CARES act making anyone who inherits an IRA have to withdraw it over 10 years rather than their lifetime. They didn’t do that just for just new IRAs opened after the change.

                And yes while it would be double taxation, we have that today in various instances. I don’t believe there is anything inherently illegal about double taxation (although to me it is immoral) that the Supreme Court would strike down.

                So I myself remain leery

                1. I wouldn’t expect a Roth taxation proposal to allow for grandfathering. After all, the point is to raise taxes so if Roth’s became taxable now, no one would do them. The point is they have captive assets they can seize, and you know once the pot becomes big enough, a certain group of politicians have no end of good intentions they want to pursue with your money.

                  1. Xerty, Why limit it to Roths then? There are captive checking and savings accounts in every bank. That’ s the rabbit hole I mentioned in a previous post.

      3. 2wr-
        I’m thinking of doing a conversion this year on a couple of my big losers–although they are slowly rising.
        Reasons? 1) Taxes rates will likely be higher in the future.
        2) If they recover, they won’t be raising the amount I’ll have to take as an RMD in the future years. And no tax on that higher value in a ROTH.
        Check taxes- Use a free calculator like Turbo Tax’s or H&R Block’s – available online– not their regular tax package- unless you have it.
        3) Even tho the amount I’ll be converting will be a bit higher than the RMD I don’t have to take this year, it won’t cost much in taxes.
        4) The older you get, the higher the percentage of the IRA you have to pay- even more tax.
        Keep in mind, a conversion can no longer be reversed (recharacterized).
        I wish I knew if the RMD might be canceled in 2021- if so, I’d split the conversion between years.

        1. GARY, that’s a good question I assume your aware of the Neal / Brady bill raising RMD age to 75. Depending on your age you may have a opportunity to stretch that out even more, I’ve read that bill has a very good chance of passing. I’m sure hoping I can continue on my strategy a while longer.

          1. mike-
            Good news if it happens- but not for me- am past that milestone…ugh.
            Skipping it again in ’21 is on my Xmas wish list.

        2. Thanks everyone….. At least maybe there’s some value for others beside me in having started this topic. Gary, you raise an interesting aspect of a conversion I hadn’t thought about – you can transfer securities not only cash? They transfer at the value on the day of the transfer? I know mentally I was thinking you have to transfer cash. But what’s your point about choosing your losers? It shouldn’t make much difference should it??? Winners, losers, they’re all the same in the IRA aren’t they??? Are you assuming your losers, because they’ve been increasing recently, now have more potential than your remaining winners and, therefore, you prefer moving those to the tax free forever account? And thanks for the suggestion of using the tax calculator

          And Tex, no question about it, I’m one of those who does not want to take the time to read tax c**p. Not only do my eyes glass over immediately but my brain does as well. Still how to overcome the trust issue when picking a tax professional from a phonebook? not many choices out here in rural Tennessee..

          1. 2wr and all, another way to look at RMD’s once you reach that age. If you have to do an RMD you can’t convert your RMD amount to a Roth. You are forced to withdraw it and pay your federal and state tax income tax on the withdrawal. So it is beneficial to convert as much as possible from an IRA to a Roth before you start RMD’s because you will still pay the same federal and state tax but you now have the conversion funds in a Roth IRA. If you are already past the RMD age, you can still do Roth conversions on amounts that exceed the RMD. One other item to be aware of is Medicare Income-Related Monthly Adjustment Amount (IRMAA) which is an amount you may have to pay in addition to your Medicare Part B or Part D premiums. I also evaluate the tax brackets to ensure that I’m not paying a confiscatory rate on the income.

            1. The IRS allows payment of tax on a conversion by the end of the year, so no need to do an immediate or quarterly unless it works better for you.

          2. It depends. It’s up to the custodian. One thing most people are shocked to learn is you can WD securities from IRA’s. You don’t have to take out cash exclusively .

            When it comes to transfers most accounts are now portable….In other words you can move (transfer) in most directions w most accounts. But not all. And out of some platforms only cash can be WD….

          3. 2WR, several if not all of the large brokerages let you transfer stocks or bonds or anything else from an IRA. You can do this for a MRD and/or for a ROTH conversion.

            The reason to transfer loser stocks would be you think they will bounce back at some point. So you transfer it today when it is at $10, pay taxes on the $10 as opposed to waiting until it gets back to $20. If you wait until then you will pay more taxes, all else being equal. This is why we did a lot of ROTH conversions back in March and April. All of them were stocks that had gotten hammered. I have not checked closely, but I think all of them have rebounded after they were converted. But the taxes will be based on the low value when they were converted.

            As far as tax professionals, even though brokerages cannot and will not serve as your tax advisor, many of them understand the tax rules in good detail for the common cases like most of us have. So if you have a simple case, you can consult with them. If you have a complex case like $10 million IRA’s or second marriages with kids from the first marriage or special needs trusts, then you should pay up for a tax professional. And if you have high speed internet, there is no such thing as rural any more. It is like a lot of the doctors now practice “tele-medicine”, I am sure a lot of tax professionals will do remote sessions also. They don’t want John Q Public coming into their office with Covid risks anyway. So if you need to find a tax professional from a larger city, that should be easy.

            Good luck. . .

          4. 2wr-
            Other have answered the stock vs cash thing, and the point of doing losers that can appreciate- hopefully.
            Yes- they are valued as the close of day.
            And, as noted, you have to take the RMD separately & pay tax. Then you can do whatever amount that makes sense for the conversion. I don’t mind doing it if the tax is minimal, and am not bumped into a higher bracket for the additional amount.

            1. 2WR-
              Update- I did a partial conversion today at Schwab- the price I got had to be at the time he entered the transfers- while I listened & could see online. It was lower at the time than the close of the day- so I misstated / misremembered on that.

  4. From Bloomberg:

    In the corporate credit market, yields on junk-rated debt sank to a record low this week of just 4.45%. Within high-yield, the average yield on CCC rated securities — the bonds most at risk of default — dropped to the lowest level since September 2014.

    “The bullishness is rampant,” said David Rosenberg, founder of Rosenberg Research & Associates Inc. “Life has been good for risk assets this year, once governments and central banks primed the pump like never before,” he added. “This is how asset bubbles are formed and we are in one now and could well be in one for years to come.”

    From Financial Times:

    Thomas Peterffy, the billionaire founder of Interactive Brokers, who first started trading on the now-defunct American Stock Exchange in the 1970s, says the current environment is unlike anything he has ever seen before — but understandable. “Money is now so easy, why not borrow what you can and put it into stocks? That’s what our customers are doing, and they’re making helluva lot of money,” he says.

  5. With some of the IG issues trading at almost $27 it is almost tempting to short them. Can one short preferred stocks / baby bonds?

    eg. PFH a PRU IG with 4.125% coupon has YTC of a mere 3% and callable Sep 2025. Was trading close to $26.

    Sure, it may be a super safe security but at $26s sure tempting to short it till the next ex-divdend date and clip some $0.35-$0.70 profits?

    Some of Quasi IG rated mREITs seem even better shorts if Fed / govt. mandates allow tenants to postpone rent or as more tenants cannot pay due to bankruptcies

  6. Taking profits into strength. Buyers live higher but sellers live longer. This market is out of control. Have a ton of dry powder. Flat for 2020 as my total return. Happy where I am. No FOMO. I might be nuts but I am content.

    Needless to say, I am not walking on the wild side.

    Many different ways to play a market.

    1. I have been trimming off some capital gains the past few days, and weeks actually. Over 60% cash which I’m OK with.

      1. Mikeo, I may at some point fairly soon pull the reigns back, but this year has just been off the charts crazy good and the calvary is still charging. I didnt play market today, being outside, but I looked and saw NYCB-U jumped over 10% today. Wow, I got a nice big slug of those turd balls. May ease off some of those next week and capture some tax free gains on that one if I can. Who knows, as its still damn near 6% even now.

        1. Grid, I don’t have a nice pension coming in to supplement my SSA check so must TRY to be conservative with the small taxable portfolio and even smaller IRA we have to depend on. This goes against my shoot-from-the-hip nature and is, I guess, my just rewards for a wild and crazy youth. Boy, did I have fun! 😉

          I think I’ll go for a motorcycle ride today on my 650 twin.

          1. Mikeo, my “youthful indescretion days” are memories no amount of money could ever replace! Thank God I did it then as I dont have the energy or “enthusiasm” to do it now! 🙂
            Market risk, credit risk, sector risk, regulatory risk, individual company risk, duration risk, inflation risk, black swan risk, etc. etc. Some or all premeates into any decision even sitting in cash. But the investment sleep at night factor, just like our youthful memories, is priceless too!

      2. Mikeo, Me too, I am at 40% and have place what I hope are value proposition buy limits. I want to upgrade overall quality, AT SOME POINT IN TIME THAT I CAN NOT PREDICT. I can not afford the whooo-risks or explain them to my wife.
        By the way: Here’s an interesting acronym that I remember from being on an order placement queue decades ago told to me by another broker, “SLobs over BLiss.”
        SL (place Sell Limits over the current price) BL (place Buy Limits under the current price). I know it is generally used. I still use that reminder, but just recently has the “meaning” kicked, in years later. Generic translation: buy low, sell high or How to direct slobs toward bliss.

        1. Joel, I agree. You have to stay within ones personal comforts or it wont work anyways as human emotion can be a portfolio killer. I can tell you what we dont want… 1940s action… Ala, home of the 6%-8% inflation, and 3.5% perpetuals coming to market at same time. Not really a good combo.
          Also one should never acquire an ego an conflate riding a wave with “insightful investing acumen”. Im riding a higher yield wave with part of the stash. But I do at least make sure its with a company that is improving cash flowings and on general upswing. Not dumpster diving hopeful wannabe maybe turnarounds such as mall and hospitality preferreds though. Every man has got to know his limitations!

        2. Joel, I never heard that “SLobs over BLiss” acronym but I was never a broker either. I certainly did learn the advantage of limit orders when I was a short term momentum trader using a black box system called Indigo.

    2. Hmm I don’t quite get this BUT I LIKE IT !!!!!!…………”.Buyers live higher but sellers live longer. “

  7. I have a stable of core safe issues. But I went to the wild side already over a month ago. QRTEP, SCCC, and NYCB-U are my biggest individual issues for time being. Even recently bought dumpster PRIF-F. Trash is cash for me near term.

  8. A big positive feature with ECC anyway is their debt maturities — or lack of them. Nothing due until 2026, and no repurchase agreements or any of that nonsense. Pretty low hurdle, especially for the debt (ECCX, ECCY) instruments, whose interest payments are covered something like 9x or 10x by investment income.

  9. Given that you are Taking a Walk on the Wildside, any thoughts on TravelCenters. New executive management in place a year ago and focused on managing costs. Cash from operations appears to be increasing. The common stock price has more than doubled in the last 12 months. All 3 of their preferreds are past their first call date, and one is at 8.25%. But, they have 2 preferreds at 8.0%. The dividend of $0.50 and the 8.25% preferred offer call protection versus the current price at $25.45 of TANNL.

    1. @LarryL : I own a few hundred shares of TANNZ. Bought initial shares about 2 years ago and added some more earlier this year, average price paid about $23. So far so good collecting the dividend on this BB that matures in 2030. It is callable anytime, but I don’t think it will be real soon. About a year ago they sold off all their convenience stores at each truck stop and raised about 300 million dollars. I thought for sure they were going to call in at least one of their BB issues if not all three, but instead they took the money and bought more truck stops. Right before this virus hit they entered into an agreement with IHOP to convert most all of their restaurants to IHOP franchises, but I don’t think that is doable for the near future, but will be a good move when it does come about. I have a friend who is a long haul driver for Werner trucking and he said most truckers he knows plan their stops at TA Centers when they can, fuel and service prices are good. This is my wild card holding I guess you could say along with a few shares of MNR.C. Thanks to Tim McPartland’s advice back during the crash I loaded up on CMS.D and sleep very well at night.

  10. My walk on the wild side is with preferreds from NLY & AGNC. They are not risky with their coverage ratio but the FTF will be tricky in the future. I do see the 10y yield going to 1.50% resistance so that will help if we get there. ATB.

    1. With NLY-D gone most of the “safe” m-REITS are F2F. Among NLY issues, considering coupon and spread, NLY-I stands out right now.

      1. Bob-in-DE , I agree NLY-I has been the best choice for a while. Trading in and out of these two Agency companies is very safe because of their dividend coverage. I won’t touch the other companies though.

      2. Bob, why NLY-I rather than NLY-F? Nearer call date on the F?

        – NLY-F coupon is 6.95%, call 30 sep 2022, and floor is 4.993% (I am assuming 3m LIBOR is effectively zero)
        – NLY-I coupon is 6.75%, call 30 jun 2024, floor is 4.989%

        They’ll both float at effectively the same rate, but F is somewhat cheaper with a higher YTC.

        1. The FED has stated they will keep rates at zero through ‘23. So NLY-F can’t be a buy and hold, only for a trade IMHO. ATB

          1. Tim,
            Holding NLY-F & I, and AGNC-N & O. Dabble in NRZ for trades.

            mREITS are about the curve, and while I agree the Fed will hold down the short end for years to come, how the longer end plays out is anyone’s bet. A good stimulus package, along with COVID vaccine & therapeutics, would tend to pressure long rates upward, sharpening the curve.

            1. Fredson, I agree the steeper yield curve will help NLY & AGNC as the net interest margin increases. The problem with F series is it changes to floating rate in ‘22 and the fed funds rate could still be at zero. Will you be happy with 4.993% or close to that? Would if you are stuck holding longer than you planned. NLY-I is the winner by along shot.

              1. Agree with TimH on NLY-I. That’s based on pricing of the moment.

                I’m looking at the yields, the reset rates, and the time to call.

                The NLY issues frequently get out of kilter with each other and provide nice trading opportunities that are often short lived.

                1. – NLY-F coupon is 6.95%, call 30 sep 2022, reset rate is 4.993%, closing price on 04 dec was $24.09 which gives a current yield of 7.21% and YTC of 9.14%
                  – NLY-I coupon is 6.75%, call 30 jun 2024, reset rate is 4.989%, closing price on 04 dec was $24.25 which gives a current yield of 6.96% and YTC of 7.72%

                  Are you saying that the extra 19 months to call/reset for the I series is what makes it compelling? (Just trying to educate myself, not be combative.)

                  1. Bur – your reset rates are low. Spreads are 4.993 and 4.989 for resets coupons of 5.22 and 5.21, for F and I.

                    The two have a fair difference in time to reset. I will be at it’s original coupon for almost 2 years after F has reset.

                    That’s why the nod goes to I.

                    1. Clear, thanks. Thanks for reminding me that 3M LIBOR isn’t (yet 😉 at zero.

  11. I prefer the safety of the bond ECCX. 100bps spread between bonds and Preferreds isn’t much for the added safety.

      1. I was going to say the same thing. But I like $ECCY a tad more than $ECCX, but both are good and ridiculously covered.

        1. ECCX/Y should go above stripped par as soon as what I believe an ATM offering going right now is complete. At that point, ECCX is clearly better at the same current yield as ECCY is a “call buffer” and will get called first, giving you a warning.

      2. Tim,

        Don’t know if you were influenced by the Barron’s article favoring the shift from high-yield paper to CLO-types: https://www.barrons.com/articles/citigroup-now-recommends-high-yield-loans-instead-of-bonds-heres-why-51606150771?siteid=yhoof2.

        I’d take comfort in seeing that ECCB only dropped to $15.61 at its lowest during the crash – that’s not all that much off the S&P drop. But we do kick ourselves for not picking this up in the low 20’s.

        The spreadsheet has the holding’s maturity as 2020 – I think you meant 2026?

    1. ECCB has typically had a partial return of capital component. So in addition to the slightly higher yield than ECCY/ECCX, a portion of the ECCB payout is tax deferred. This should be considered when evaluating risk/return between the preferred and the safer baby bonds.

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