I note a number of people are talking on the site in various spots about interest rates–more specifically about the 10 year treasury pop.
Today the 10 year traded as high as about 1.97% before settling in the 1.93% area. The question is where are we going with these interest rates–sure seems like they want to challenge 2%–we’ll see.
I think what is best known by us that have been investing in preferreds for many years is that the high quality, low coupon issues are most likely to fall the most when rates rise. Certainly they haven’t gotten any love this week.
Some of the newer high quality, low coupon issues have backed off quite a bit this week. We had been used to these issues rising in spite of their dreadfully low coupons–not the case this week
The new PS Business Parks 4.875% (PSB-Z) perpetual which was sold on 10/24/2019 and traded as high as $25.10 has moved lower and now on the NYSE traded as low as $24.46 today before closing at $24.57.
The Northern Trust 4.70% perpetual (OTC Grey NTREL) held up better closing today at $25.10–and has traded only as high as $25.25–it remains on the OTC Grey market so we will see what happens when it moves to the NASDAQ.
The new Allstate 4.75% perpetual (OTC Grey ASTLZ) which only began trading 5 days ago has not reached $25 yet–closing today at $24.77.
The Public Storage (PSA) 4.875% issue sold in September was at $26.50 20 days ago–now it is at $25.60–whoops it got a bit ahead of itself.
Of course there are other examples–and I personally experienced small losses this week–very small–but losses just the same. I don’t hold the sub 5% issues, but holdings some CEF preferreds I am susceptible to some give back.
I would be surprised to see rates rise too much more–but only 6 weeks ago we were in the 1.5% area–and I wouldn’t have expected a 40 basis point rise then either.