Preferred Securities Market Insight - Rates Rally, Spreads Tighten and Preferreds Rebound
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:
Preferreds rebounded sharply. The ICE BofA Fixed-Rate Preferred Securities Index returned 2.23% in April, recouping March’s drawdown and bringing year-to-date (YTD) performance to 0.8%. $25 par retail securities (+3.01%) outperformed $1,000 par institutional preferreds (+1.33%), and contingent convertibles (CoCos) (+2.65%) participated in the rally.
Rates and spreads both contributed. The April rally was a mirror image of March. Treasury yields stabilized after the Iran-driven repricing, investment-grade (IG) spreads tightened nine basis points (bps) and high-yield (HY) spreads tightened 45 bps, providing a tailwind for hybrid capital across the rating spectrum.
Bank earnings reassured. 1Q26 results from money centers and regionals showed stable-to-expanding net interest income (NII), robust capital market revenues and benign credit. Management teams pushed back hard on private credit and consumer credit narratives, reinforcing the belief that exposures are manageable and losses contained.
Technicals remain a tailwind. Despite a pickup in institutional issuance post-earnings, banks have redeemed over $10 billion more in preferreds than they’ve issued YTD as regulatory relief reduced capital husbanding. Preferred ETF inflows topped $300 million in April.
