Preferred Stock Strategist: March Update (UBS)
The following is a summary of a UBS full-length report on this topic.
* Prices Stay Firm:
Continuing a trend this year, preferred prices were again virtually unchanged during February. Various factors that helped contribute to the firm tone of the market include range-bound Treasury yields, a further narrowing of credit spreads from recent highs, and continued redemption activity with limited new supply.
* "The Bond" Returns:
The Treasury reinstated the 30-year bond after a five-year hiatus, giving issuers and investors a "true" 30-year point to serve as a benchmark. However, long maturity fixed income investments that would typically use the new bond as their pricing basis either adjust for the yield premium on the new bond or continue to use the old 30-year bond as a benchmark.
* Where To Turn?:
For investors looking for exposure to preferred securities, we suggest considering issues in our neutral-rated coverage universe as candidates for inclusion in the portfolio. These securities can provide a way to capture yield without taking on above-average duration exposure.
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