Bank preferreds

[rb]

First I just want to say how great it is to have found this place. The old M* boards were such a great place back way back when.

I hold small amounts of JMP-L and WFC-Z that are now 10% below par and yielding over 5%. It seems like I have been waiting years for such a scenerio to buy more and make these full positions and relax with some safe, reliable income. But I am hesitant to pull the trigger. How much lower do you think these types of safe, solid preferreds will go as interest rate hikes start to happen?

[richardsok]

rb ---

No one knows how high interest rates must rise to counter inflation.
" " " if Fed has the stomach to seriously damage equity prices by doing the necessary hikes
" " " if the Fed will take the easier route of minimal rate hikes and de facto acceptance of inflation

I also have my eye on preferreds, but am NOT buying. I need to see some rate hikes actually accomplished and some stability in preferred pricing.

That said, I use FPF as my bellweather chart to watch and will place money down on some individual preferreds for long term holds -- but will mostly trade HPF and sister CEFs on technical signals.

[Fearchar]

Feb 19, 2022 1:10:32 GMT richardsok said:

No one knows how high interest rates must rise to counter inflation.
" " " if Fed has the stomach to seriously damage equity prices by doing the necessary hikes
" " " if the Fed will take the easier route of minimal rate hikes and de facto acceptance of inflation

True!

However, Baa bonds have already sold off so that they are now yielding 4.09%.
That's higher than they were prior to the pandemic (Aug 2019-Feb 2020).
30 year fixed mortgages are now 3.92%; again higher than the immediate pre-pandemic levels.

Question is that enough or do they need to be higher?

November 2018 (last time the brakes were slammed) Baa bonds were 5.22% and 30 year mortgages 4.94%

So, market has significantly tightened.
Still, I'm not seeing much fear in junk bonds.
ICE BofA US High Yield Index Option-Adjusted Spread would need to move above 7% for me to get excited.