Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       
Blog Home
Bob Carey
Chief Market Strategist
X •  LinkedIn

  Preferreds Offer Yield Spreads Similar To Speculative-Grade Debt
Posted Under: Sectors
Supporting Image for Blog Post

View from the Observation Deck

  1. The chart provides a comprehensive snapshot of how preferreds have fared over the past five years. The period captures the start of the financial crisis through 4/30/12.
  2. Over 80% of publicly traded preferred securities are issued by financial institutions.
  3. Prior to the financial crisis, preferred securities have historically offered investors a yield spread of 100-250 basis points over the benchmark 10-Yr. T-Note (see yields from 4/30/07). That spread was 493 basis points on 4/30/12.    
  4. The Merrill Lynch U.S. Preferred Stock Fixed Rate Index carries a BBB2 credit rating (investment-grade), yet its yield spread (493 bps over 10-Yr. T-Note) more closely resembles that of speculative-grade debt.
  5. The Merrill Lynch U.S. High Yield Master II Index carries a B1 rating (speculative-grade) and has a yield spread of 567 basis points over the 10-Yr. T-Note.
  6. While the recovery in the financial sector continues to be a slow and arduous process, preferred securities, in our opinion, offer investors seeking current income an intriguing alternative in today's climate.
Posted on Thursday, May 3, 2012 @ 5:09 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
Search Posts
Market Commentary and Analysis
Market Commentary Video
Monthly Talking Points
Quarterly Newsletter
Market Observations
Subscribe To Receive Email

Biotech Pipelines and “Pharmerging Markets” offer Growth Potential
The Markets Fight Through the Headlines
China May Only Pose a Near-Term Challenge for Price of Copper
Agriculture Prices Take Breather Following Strong Decade
It’s Tough To Stay On Top!
Job Creation to Drive REIT Recovery from this Point Forward
The Question of Recession
Sell in May and Go Away! Think about it first.
Will the 2016 Summer Olympics Boost the Bovespa?
India's Stock Market Rebounding Despite Stubborn Inflation
Skip Navigation Links.
Search by Topic
Skip Navigation Links.

The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.