I had just looked at the overall picture of preferreds and baby bonds early today and ‘on average’ they were up 2 cents from last week. But on a day where interest rates ground higher (as represented by the 10 year treasury) to close at the high of the day – 1.41% – investment grade issues–lower coupon issues–were pretty much all ‘red’.
Losses were not deep–maybe a dime, but out of the 217 $25/share preferreds and baby bonds I track only 22 issues were higher–with the balance unchanged or lower.
So going back to the ‘olden days’—the days when interest rates used to move in both directions we know a couple things. 1) Higher coupon issues will trade firmer than low coupon issues when rates move higher and 2) issues that are near maturity (baby bonds or term preferreds) and those issues that are ‘anchored to $25’ with a call threat over hanging them will move little with higher rates, except in extreme conditions. In general this will occur irrespective of the quality of the issue.