Preferred Securities Market Insight - Rates Drove the Drawdown, Dispersion Is Emerging

Our preferred securities specialists look back at the market’s performance and provide incisive commentary to help you make sense of what drove the market—and what may be on the horizon for preferred investors.

Key takeaways from the latest edition:

Rates drove performance: Higher Treasury yields and a repricing of Fed expectations primarily drove weakness across preferreds and hybrids in March.

$25 par underperformed $1,000 par: Retail preferreds lagged in March (approximately -3.9% versus -1.7% for $1,000 par investment-grade), reflecting greater duration and equity sensitivity in a volatile rates environment

Early cracks in private credit: Idiosyncratic stress in business development companies and software-linked credits contributed to modest spread widening, though moves remained contained.

Limited direct exposure, but important connectivity: Preferreds have minimal direct exposure to private credit, but indirect linkages through banks and insurers warrant monitoring.