Tuesday Morning Kickoff

The S&P500 opened the week at 3318 and closed the week 2% higher (of course) at 3380. The 10 year treasury started off at 1.57% and ended the week at 1.59%, although it was as high as 1.64% during the week.

The Fed Balance Sheet grew by $16 billion last week as the overall assets carried by the Fed remains flat over the last 8-9 weeks. The Fed had previously announced a reduced $5 billion weekly repo facility from mid January to mid February–they have now announced another $5 billion reduction starting in the 1st week of March. You can see the repo plans here.

The fact of the matter is that with the flattish balance sheet the last 2 months something has to give–we are now in very dangerous territory as the government debt continues to grow and the Fed will have to monetize the debt–with falling repo targets they will have to ramp up purchases of bonds and mortgage securities.

We are in significant danger right now of an INTEREST RATE SPIKE if the Fed doesn’t step in. We’ll just have to see what shakes out.

Last week we had a bunch of new income issues announced.

We started the week off with the pricing of a new perpetual preferred from Brookfield Property Partners (BPY). The issue is trading under OTC ticker BOPTP and last priced at $25.37.

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mREIT New Residential Investment (NRZ) sold a new fixed-to-floating perpetual preferred. The issue is trading under OTC temporary ticker NRESP and last traded at $24.81

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Telecom giant AT&T (T) announced a new perpetual preferred with a coupon of 4.75%. The issue is trading under OTC ticker ATTXL and last traded at $25.20

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mREIT Dynex Capital (DX) sold a new fixed-to-floating rate preferred. The issue is trading under OTC ticker DXPBN and last traded at $24.95.

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Lastly Medalist Diversified REIT (MDRR) sold a new preferred with a mandatory redemption in 2025. This issue came to market at $23 but has a liquidation preference of $25. The issue is trading on the NASDAQ and last traded at $20.56.

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The average $25 preferred and baby bond moved by just 1 cent–lower last week. Banking too a nickel hit while the shipping issues (not in the chart) bounded back by 16 cents.

Below is the economic calendar for the week. All in all there isn’t likely much here that will move markets. The FOMC minutes are released on Wednesday, leading indicators on Thursday and PMI (purchasing managers index). While I am starting to believe more and more that the corona virus WILL start affecting economic numbers it may be too soon to see those showing up in any releases.

17 thoughts on “Tuesday Morning Kickoff”

  1. Tim, Your comments re the balance sheet. I agree – it’s the whole deal and not a popular discussion. They’re in a hellish spot here. Imagine Powell coming in the office one day to find out inflation is exceeding tolerable limits. Not exact but some notable overlaps to BOJ 1991. The domino chain on this is a big deal. Meanwhile – party-on though I’ll confess to overall moving to more and more conservative positions, and increasingly using cash for captures rather than holds; to reduce time in market.

  2. CORR preferreds A getting pushed down this AM on 3X daily average volume, has been callable since 1/27/20. I don’t see a filing on http://www.sec.gov or their web site. Anyone here know anything?
    Have a great week, Nomad

    1. Good question. I couldn’t find any info yet. I did have a buy order in for a long time and it went through today at 25.09. Maybe I got lucky, maybe not.

  3. Thanks Tim. I agree that the fed needs to step up. Grid has been enjoying himself on SA. Relentless pounding of Pendy. We may need a separate category just for those comments. Just kidding, lol. ATB.

    1. Tim, Its been a tag team effort over there. Kaptain Lou from here has been doing an admirable job also under a different name. Not letting him get away with saying Exxon at $80 purchase was a good buy, and craziness that he states he is making money off WPG when he was buying at $5 and it sits at all time low at $2.70 ish. Ridiculing him is my only purpose over there basically, ha.

      1. You folks are filing up the comment stream over there–I will have to stop and have some entertainment time I guess.

        1. Tim, You need to come sit up in the peanut gallery and join. Ask Pendy if he would be willing to peel off some $80 XOM shares for you, ha.

      2. Now call me crazy, but in the TMZ-anals of SA, does it appear there may have been a parting of ways between Pendynut and Wrida-Mora-Offa? In light of his XOM posture, this looks like a hit piece aimed straight at Pendynut: https://seekingalpha.com/article/4324090-exxon-mobil-cannot-cover-dividend-and-great-news?utm_medium=email&utm_source=seeking_alpha&mail_subject=must-read-exxon-mobil-cannot-cover-its-dividend-and-that-s-great-news&utm_campaign=nl-must-read&utm_content=link-0

        1. Im keeping it simple. Pendynut says his $80 purchase of XOM was a good buy. I trust him implicitly. I think I am going to buy at $80 and not pay a penny less.

          1. Grid, You’re the only one I know that could actually buy XOM tomorrow at $80 and probably sell it within a few hours for $82, despite it’s current 6-handle, er, 5-handle. Some day when I grow up…

            1. I got lucky, the investing Gods wanted me to make a fool of Pendy so I did. I dont own common stocks. I just get lucky. I have owned XOM twice in past 8 months owning maybe 5 days in total for $5-6 a share gain. I also bought PPL for a $2-$3 a share trade with XOM last summer. Those have been my only trades in commons for several years. If XOM gets to $55 I will try again.

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