Preferred Securities Market Insight - Musical Chairs
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 delivered strong total returns in January, with the ICE BofA Fixed Rate Preferred Securities Index (P0P1) up 1.32%, led by $25 par retail preferreds (P0P4) +1.94%. Institutional $1,000 par securities lagged but remained positive (CIPS +0.52%), while contingent capital performed well (COCO +1.15%).
Rates and credit markets decoupled. Treasury yields rose early in the month amid geopolitical and global rate volatility, while credit spreads tightened to multidecade lows as risk appetite remained resilient.
The Fed paused after three consecutive cuts, while markets digested the nomination of Kevin Warsh as the next Federal Reserve chair, reinforcing expectations for a data-dependent, inflation-aware policy path.
• Bank fundamentals remain a key pillar for preferreds. Fourth-quarter 2025 earnings and FY26 guidance point to improving net-inetrest margins (NIMs), benign credit quality, strong capital markets activity and ample capital, supportive for both valuations and income stability.
