Weekly Kickoff

Well we had a long weekend to rest up so once again we are ready for a wild and crazy week–you know that markets will gyrate plenty–there is too much uncertainty in the world. Where are rates going? Where are energy prices going as we export our natural gas to Europe with the Nord Stream 1 pipeline cut off by Russia to Europe. Has inflation peaked? What will full blown quantitative tightening do to markets? It’s going to be a very expensive winter around the globe.

The S&P500 fell by a strong 3.3% last week, although futures early this morning (5 a.m.) are showing a stronger opening today–will it hold?

The 10 year treasury yield jumped by 16 basis points on the week to close at 3.19%, although it had been as high as 3.30% earlier in the week.

The Federal reserve balance sheet fell by $25 billion–and this month (September) the Fed will step up quantitative tightening as they will target reducing the balance sheet by $95 billion/month. In particular what will the lack of a back up demand marketplace do to mortgage rates?

Last week preferred stocks and baby bonds got ‘hammered’ as the average $25/share issue fell by a strong 55 cents. Investment grade issues fell by the 61 cents. Banking issues fell by 43 cents, CEF preferreds off just 6 cents. BDC baby bonds were off just 22 cents

The average $25/share price is now just 44 cents above the low for the year which occurred on the week ending 6/17/2022 at $22.22/share.

Last week we had no new issues priced.

9 thoughts on “Weekly Kickoff”

  1. Tim, please consider having the color for the numbers on the right axis on your chart match the color for the 10 year Treasury rate. I’m not as smart as the average III reader, and it took me a while to make the connection.

    Cheers,

    Retired Sailor (sadly now working a second job as a land-lubber)

    1. Could also add a legend on the right to represent the 10yr T data series. 🙂

  2. The struggles for behemoth preferred ETF PFF continue. The fund is now at its low share count for the year (458 million) and has seen its assets go from $20.5 Billion in January to below $15 Billion today.

    $2.3 Billion of outflows. Counting dividends down 14.25% YTD. Right now this fund is holding only $10+ million in cash (7 basis points).

    It has been a bloodbath for that fund in 2022, with no end in sight to stop the bleeding.

    1. So investors wised up that PFF was a horribly designed investment vehicle, where buy high and sell low was the order of the day?

      1. Justin, unfortunately we can’t all be in the Leona Helmsley club! Some of us are in the “little people” club she talked about. Say you have an account with total assets of $10k and you wanted some exposure to preferreds, maybe 10%. Before free trades, it was 100% out of the question to buy 40 different preferreds @ $25 each. But even with free trades, it still makes sense to do one trade and add PFF. We did have PFF in some of these smaller accounts, but fortunately sold it early this year. So there is a time and place IMO for PFF. Probably should have added some Gamestop, Bed-Bath or Bitcoin instead!

        1. well BTC broke 20,000 and didn’t recover this time. Is it in free fall ?
          Might give you a chance to buy it cheap Tex

  3. Tim,
    I am one of those going off to work. Hard to say what the week might bring. Based on the amount of commute traffic, lots of people took Friday off and today could be the same. Power went out for a short time during the night so good chance we have isolated power failures if not rolling backouts today.
    I seem to remember Markets can be volatile after a holiday with people on holiday.

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