The Standard and Poor’s 500 rose by just shy of 1% last week which puts the index about 2% below all time highs.
The 10 year treasury ended the week at 1.58% after trading as low as 1.55% and as high as 1.62%. Investors yawned as the latest reading of consumer prices shot higher–as measured by the PCE (Personal Consumption Expenditures). The index rose to 3.6%–the highest level since 2008. Of course the argument continues as to whether this rate is ‘transitory’ or not and whether it will calm down in the months ahead.
The Federal Reserve balance sheet fell by $18 billion last week – nothing new – a stairstep pattern higher–there are no surprises in this number anymore as the goal is $120 billion per month in quantitative easing. The Federal Reserve insists on jamming more and more money into the system while banks try to give it back to the Fed. There is a maddening cycle of QE causing banks to use reverse repos to unload cash on an overnight basis and taking the bonds back from the Fed which the Fed had just bought as collateral. Fridays overnight reverse repo was at $479 billion.
The average $25 preferred stock and baby bond rose by tiny amounts last week–a gain of a 3 cents. Investment grade rose by 2 cents, bank preferreds by 4 cents, mREIT preferreds absolutely flat.
Last week we had just 1 new income issue price.
Arbor Realty Trust (ABR) priced a new issue of perpetual preferred stock with a coupon of 6.375%. The company is using the proceeds to redeem all 3 of their older high yield preferred’s.
The new issue is trading on the OTC grey market under temporary ticker ABRRP and closed on Friday at $25.64.
Ready cap dida new issue today. 6.50 fixed, 100 mm
What a difference a year makes, some of my biggest gainers are now long term holds. This is one benefits of not trading for small potatoes. Prices were pretty firm today.
HCXZ redemption on 7-1. This one only a 5.25% initial offering. How low can we go ?
Let me see if I can figure out what yuzall are saying:
Securities prices keep going higher and higher because the Fed keeps artificially pumping cash into the securities market. This has never been done before, so noone quite understands it, but a lot of people assume that the Fed will someday for some reason have to stop doing this, and the artificial prices of many securities will drop sharply.
Is that what’s being said?
Thanks.
D.
The morning comments, and the entire site remind me of a start the day coffee from wayback – ‘Fog Lifter’ (before I began roasting my own).
Thanks!
“The Federal Reserve insists on jamming more and more money into the system while banks try to give it back to the Fed.” Seems untenable but I’m not smart enough to even guess how it ends. Anyone care to speculate where this goes off the rails and what Hail Mary to buy to benefit from the wreckage? I’ve bought some gold, a few floating preferreds and utilities, but it seems to me that if the cash party ever stops, everything is coming down and fast.
Tim, just a quick note of appreciation for your kick off summaries. Way better to come here than watch the talking heads bobble around on the financials shows in the AM. Thank you!
You’re welcome SanDiegoSurfer
Tim, One of my Monday morning reads also.