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Weekly Kickoff

Interest rates rose over their close from the previous Friday closing at 4.51% (versus 4.47% the previous week). The personal consumption expenditures (PCE) inflation components came in about as forecast which helped to set up a rip roaring rally in some equities (the DJIA) on Friday which managed to drag preferreds and baby bonds up fairly sharply on the day.

The S&P500 fell on the week by about 1/2%, although it remains within striking distance of a all time high. Only God knows if we go to a new all time high soon or if we take a break and regroup around these levels.

As mentioned above the 10 year treasury yield rose to close last week at 4.51% from the previous weeks close of 4.47%. This week, on Friday, we have the employment numbers for May–these will be very critical (in my opinion) as the Fed is substantially focused on weakening employment as a gauge of economic strength (or weakness). Of course there are numerous other economic reports that will feed into interest rate directions for the week ahead.

The Federal Reserve balance sheet assets fell by about $15 billion which should be about a normalized rate now with a reset $60-$65 billion dollar runoff target.

While there was a substantial rally in income issues on Friday the average $25/share preferred and baby bond rose just 14 cents on the week. Investment grade issues rose by 12 cents, banks by 7 cents, mREIT preferreds rose by 16 cents and shipping preferreds rose 25 cents.

Last week we had 1 new income issue price. Brookfield Infrastructure Finance price a new baby bond with a coupon of priced a new non cumulative preferred with a coupon of 7.25%. The pricing term sheet is here.

7 thoughts on “Weekly Kickoff”

  1. Thanks! I also saw this weekend that Ag Mortgage Trust just issued a new 9,5% babybond called AG Mortgage Investment Trust 9 500 Senior (MITN)

    1. Saw an article the other day on Seeking Alpha, here is a quote from it:

      “MITT had an absolutely disastrous COVID period, with book value falling nearly 80%, much worse than the rest of the sector. It then deleveraged and has been running at lower risk; however, its book value still underperformed over the 2022/2024 period. This is clearly a higher-risk mREIT, so its high bond yields do reflect that.”

      There is a nice graph giving you a better picture of what the author is talking about. Here is the link to the article:

      Preferreds Weekly Review: Tight Spreads Make For A Compelling Issuance Environment

    2. Thalita; With a 9.5% coupon the first thing that comes to my mind is: WOW, this must be a really desperate company for $$$$.

      1. My uneducated guess is they’re looking to redeem MITT-C, which floats as of 9/17/24 at LIBOR + 6.476. If I read the prospectuses (prospecti?) right, -C was for ~ $100MM, MITN raised ~30MM, MITP was for ~65MM.

    3. That is incorrect, MITN was issued in January. The new issue is MITP. Both are 9.5% baby bonds.

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