UBS - 12 April 2006
*Move to market weight:
* We move to a market weight allocation from modest underweight in the preferred market during the second quarter of 2006. Underpinning our decision is the view that slowing economic growth will likely ease pressure on long-term rates, particularly during the second-half of the year.
* Upgrade security ratings from Reduce to Neutral:
* With long-term interest rates near the upper end of our target
range, we are more comfortable extending duration and moving certain lower coupon securities that were formerly rated Reduce to Neutral. That said, we retain a cautious stance with respect to preferreds with the longest duration exposure and lowest coupons until it becomes more apparent that rates are poised to move lower.
* Methodology change:
* We will continue to rate issues according to our Buy/Neutral/Reduce ratings when a deeply discounted preferred (e.g., generally priced below $24) approaches its first call date and, in our view, is not likely to be redeemed.
* Rating changes:
* We upgrade 23 preferreds to Neutral from Reduce, extending the average duration of our Neutral rated coverage to 5.02 years from 3.44. We initiate coverage on GS B, MER I, PSA G, and USB G with Neutral ratings. We reclassify RBV and SBT to Uncertain Refi and GMA and GMW to Reduce from Uncertain Refi.
|
