Last night and early today I thought “it looks like a down day” in stocks (based on futures and early trading)–I think all of this was related to the corona virus, although maybe it was a delayed reaction to the FOMC not giving common stock traders and investors anything new to trade on at their meeting yesterday. Whatever the reason I guess the clowns decided it was time to drive prices up at the end of the day and we closed up by .3 or .4%.
On the other hand the 10 year treasury wasn’t buying into the stock move as it closed almost 4 basis points lower–again. Whether the corona virus reduces growth globally or not is a total crap shoot at this point in time. No one can claim to know the answer to this at this point in time–honestly we have huge numbers of flu cases each year and literally thousands of death (37,000 estimated in the U.S. last year) from the flu–I could go on and on, but it is just silly. Not that we shouldn’t take the corona virus seriously, but a little common sense would be helpful.
Anyway, let’s take a look at how preferred and baby bonds have done for the week thus far.
You can see from the chart below that it has been really quiet–prices seldom moving, on average, more than a couple pennies week to week.
The grand total movement of the $25/share preferreds and baby bonds tracked here (661 issues) has moved exactly ZERO since last Friday. mREIT preferreds are off 4 cents and investment grade preferreds are up 3 cents since that time.
Note that the 10 year treasury is almost 30 basis points lower than 12/1/2019. This is what makes income securities interesting. It isn’t always true that higher rates drive prices lower while lower rates drive prices higher. That is a big–maybe–sometimes–it depends. More than pure interest rate movements go into pricing these securities–as the chart above shows prices moving sharply higher while rates were a bit higher and are totally flat while rates are tumbling.
Obviously there have been ex dividend dates this week and that always sways the number a penny or two–but all in all this is extremely ‘Goldilocks”–and for some of us we like it quiet. On the other hand there are more active preferred stock traders like Martin G. who would like the see more movement so they can take advantage of the volatility.
One thing that is almost certain–as soon as all of us get lulled to sleep an ‘event’ will occur which will wake us up quick. We shall see what the weeks ahead bring.