Anyone buying the pref sell-off?

[moorfield]

Just sold the last of our prefs - RE.B

Was going to wait for some of the outstanding dividends to be paid, but with the price almost certainly dropping after that happens, compounded by the direction of pref prices generally, we thought we would get out whilst we had a small gain (and June's normal dividend)

Woz

You've jumped the gun a little - RE.B have already stated that at least 10p of the 17p outstanding will be paid this year (ok, probably on 31 Dec). I'm holding on for that payment at least.

[Wozzitworthit]

Possibly yes

I knew they were going to pay at least 10p arrears, but my average buying price was only just below what the current price is, and that is bound to drop once the next XD is reached, and maybe a tad more as pref prices generally drift down

After bit of teeth gnashing I decided to play it safe

Woz

[ResourceOgre]

A crumb trail of contextual clues:

-Yields above 7% e.g. 7.25% (LLPC), 6.97% (NWBD), 6.89% (RSAB), SAN (7.17).....
-The Ukraine war looks like lasting, with oil costs depressing the European economy for the foreseeable.
-UK: Increasing public debt, ongoing "Brexit dividend", low productivity and low growth in UK, plus political uncertainty on multiple fronts (EU/NI, cotland, new PM soon, election in 2 years...)
-BOE prediction of inflation above 11% close to end of year (F*CK ME! cries a voice within)
-Base rate still low @ 1.25% .... plenty of room for rises.

Some of my portfolio has matured, giving me a bunch of cash. I am afraid that without much thought I put half of it back into NWBD. I'm no good at sitting on cash. That's what stopped me selling more of my holdings when prices were high last year .... I felt markets were high (and so it proved) so had nowhere to put the money, and I am temperamentally unsuited to sit on a pile of it, Smaug-like.

Anyone got any better ideas?

[rippleog]

I''m still waiting.

Another 10% fall for me and I think I may be tempted.

Can you explain why? Hopefully more than anchoring to historic prices! The world has changed and what worked in the past will more than likely not work in the future. Too many people are still extrapolating the last 10-15 years into the future. I know it's difficult because I'm desperately fighting that line of thinking myself. I can see no fundamental reason based on my current knowledge of the world as to why equity and fixed income should do well from here for the foreseeable. The powers that be have run out of magic bullets and we're now left to the mercy of the markets.


Preference shares are very cheap on a spread basis.
+500 to gilts is not to be sniffed at.
+350~400 for the past couple of years
credit quality is much better that 20 years ago and there is a chance of market buy backs as NWBD and LLPC did last year.
You can buy STAB @ 105 so par call risk is diminimus
As an annuity type yield it adds pretty well.

How much higher are rates going ? I dont know and nor I suspect does anybody here.
Pref prices could be unchnaged with rates 200bp higher than here as spread of +300 is not riduculous.

[Padders72]

I''m still waiting.

Another 10% fall for me and I think I may be tempted.

Can you explain why? Hopefully more than anchoring to historic prices! The world has changed and what worked in the past will more than likely not work in the future. Too many people are still extrapolating the last 10-15 years into the future. I know it's difficult because I'm desperately fighting that line of thinking myself. I can see no fundamental reason based on my current knowledge of the world as to why equity and fixed income should do well from here for the foreseeable. The powers that be have run out of magic bullets and we're now left to the mercy of the markets.


Preference shares are very cheap on a spread basis.
+500 to gilts is not to be sniffed at.
+350~400 for the past couple of years
credit quality is much better that 20 years ago and there is a chance of market buy backs as NWBD and LLPC did last year.
You can buy STAB @ 105 so par call risk is diminimus
As an annuity type yield it adds pretty well.

How much higher are rates going ? I dont know and nor I suspect does anybody here.
Pref prices could be unchnaged with rates 200bp higher than here as spread of +300 is not riduculous.

I have horrible deja vu. Did you not post the same thing on 16th July? Ahh it is a quoting error?

[88V8]

You can buy STAB @ 105 so par call risk is diminimus
As an annuity type yield it adds pretty well.

How much higher are rates going ? I dont know and nor I suspect does anybody here.
Pref prices could be unchnaged with rates 200bp higher than here as spread of +300 is not riduculous.

We're not at the bottom yet.
The ECB has not even begun raising rates.
Look at the way AXI is still falling, 83p this morning.

That said, it's an interesting point that the call risk is diminishing.

I think when prices get to the bottom they'll stay there quite a while, so no fomo unless one has money doing nothing and is in need of income.

V8

[Gan020]

Good to see some new comments.

3.45% interest is now available on a 5 year bank/building society bond.
On last nights 10 o'clock news it was reported the "market" is expecting a UK base rate of 3% by the end of the year.

On this basis a 7% yield on the prefs doesn't look too exciting to me and I'd expect the share prices to remain under pressure.

However, I can't see how the UK base rate gets to 3% by the end of the year or even by the middle of next year without killing the economy so much that inflation collapses and we then get a whipsaw affect with base rates. I don't think it will happen.

However, the secondary affects of inflation are now kicking in and whilst unemployment remains low, employees are going to have some power over wage demands.


Oh and Liz Truss wants to borrow a load more money and says it won't be inflationary. I see some risk the markets are going to lose faith with the UK and are going to demand higher yields regardless of the base rate.

[rippleog]

You can buy STAB @ 105 so par call risk is diminimus
As an annuity type yield it adds pretty well.

How much higher are rates going ? I dont know and nor I suspect does anybody here.
Pref prices could be unchnaged with rates 200bp higher than here as spread of +300 is not riduculous.

We're not at the bottom yet.
The ECB has not even begun raising rates.
Look at the way AXI is still falling, 83p this morning.

That said, it's an interesting point that the call risk is diminishing.

I think when prices get to the bottom they'll stay there quite a while, so no fomo unless one has money doing nothing and is in need of income.

V8

maybe we were at the bottom...
as I said preference shares were (and still are) mis-priced..maybe only 150bp now

remember they are all going to be subject to tenders too..

[Mikkko]

Well, I picked up a few more NWBD over the last couple of days.

Not looking to buy any more now....

But it's nice to see NWBD, LLPC & LLPD (and presumably others) ticking up a few percent.

Regards
Mick

[Gan020]

What to do? Prefs falling again as gilts rise.

At the moment I'm kind of thinking we haven't hit the bottom yet. But we are getting closer.

Is a return of 7-8% good. A year ago I'd have been delighted to press the buy button with these prices. Now I'm wondering if I do I could look very foolish in a few years time.

Decisions, decisions. For the moment I'm waiting.

[hiriskpaul]

Difficult isn't it? At the moment though I still think dated stuff looks the better value. eg Provident Financial 5.125% 2023 could be picked up this morning at 96.317, ytm 8.9%. Co-op 11% 2025 108.95, ytm 7.73%. Longer dated Metro Bank 5.5% 2028 at 56, ytm 18.1%.

[hiriskpaul]

Also Enquest ENQ1 (7% 2025) 97.879, ytm 9.15%.

More potential upside with the undated stuff of course.

ps, I went for the PF 7%, partly because I only had a small exposure previously.

[Gan020]

Also Enquest ENQ1 (7% 2025) 97.879, ytm 9.15%.

More potential upside with the undated stuff of course.

ps, I went for the PF 7%, partly because I only had a small exposure previously.

And more downside with the undated stuff as well of course.

I tend to agree the dated stuff is offering better value. My suspicion is that the MM are trying to find best price and liquidy on the prefs and are struggling to find buyers. Certainly, I'm happy to be a buyer and I have plenty of cash and even room in my ISA's and SIPP's which is where I would like to put them, but the price hasn't yet hit an area to start enticing me in.

As for the undated I absolutely cannot buy any more CO-OP, my rules allow me to buy more ENQ but I'm reluctant too, PF I have some and could add but for whatever reason I just don't feel comfortable with it.

[88V8]

Well I still think that SPs will fall as the base rate rises, and with 4-6% to come next year, depending to whom one listens, we should be some way off the bottom as regards the Prefs. Same should go for the dated stuff. If the oil price declines then Enquest in particular may fall further.

Not that I'm a buyer, but why are the Santander prefs down so far? At screen price SANB yielding over 7.5% now, and SAN 7.3% although maybe more on a live trade.

V8