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Weekly Kickoff

Well once again it is time to get a new week off to a start–of course virtually every week has important new events that are scrutinized to no end–this week the most important event will be the release of the consumer price index (CPI) on Wednesday, but we will follow this up with the producer price index (PPI) on Thursday. We know that are the ‘smart’ people will pick the numbers apart to no end–but the real smart people–those on this website, know that putting much faith in singular numbers is a fools errand.

Last week we had some giant swings in the S&P500 before the index finally closed the week down around 1% on the week. It is unfortunate that these swings were at least partially driven by a bunch of Fed folks shooting off their mouths. The same folks who were the most dovish when interest rates were at zero and helped set up raging inflation now are the most hawkish–investors (traders) listening to them much are really searching hard for reasons to buy or sell.

Interest rates closed last week at 4.38% (although now, this morning, zooming to 4.45%) which was an increase of a whopping 18 basis points from the close the previous Friday. The week ended with a giant sized increase in new jobs created–over 300,000 versus a forecast of 200,000–what a blow out number. In my mind this is a critical number–but only 1 in a bunch of important numbers of course. With the CPI and PPI being released this week we have more ‘data’ to chew on–in my mind thus far there has been little data that would indicate a rate cut is needed–we’ll see.

Last week the Fed balance sheet fell by a giant sized $45 billion. The pace of the reduction in assets continues at the announced rate of about $95 billion/month.

Last week, surprisingly, we had the average $25/share preferred stock and baby bond close the week flat–in spite of interest rates moving 18 basis points higher. For 2024 YTD we have had the average share move higher by 42 cents–although interest rates have moved higher by about 50 basis points (yes 1/2%) during the same time frame.

The average share was flat for the week while investment grade issues were 8 cents lower, banking issues were 2 cents higher, mREIT issues were 12 cents higher and shipping issues were 6 cents higher.

Last week we had no new income issues priced, although we did have 1 follow on offering from CTO Realty Growth (CTO) 6.375% perpetual preferred (CTO-A) which was priced at $20/share.

One thought on “Weekly Kickoff”

  1. The spread between big banks’ preferred stock and the ten year is very tight? There seems to be a lot of demand for preferred shares and they don’t seem to be affected much by interest rates the last couple of weeks. There are even periods where the ten year treasury is goind up and funds like PFF and PGX going up. I am tempted to sell some of my low-yield prefs and wait for a correction. What do you think Tim? Why are spreads so tight?

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