Preferred Securities Market Insight - Labor and Government Challenge the Fed as Preferreds Rally in August

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:

The ICE BofA Fixed Rate Preferred Index gained 1.23% in August, bringing YTD performance to 3.74%. Both $25 par and $1,000 par preferreds rallied over 1%. By contrast, USD contingent capital securities underperformed amid political and budget concerns.

Large downward payroll revisions and rising unemployment tilted Fed policy decisively toward rate cuts at the September FOMC, reinforced by chair Jerome Powell’s dovish Jackson Hole comments.

The two-year US Treasury yield fell 35 bps and the 30-year rose three bps as markets priced easing but questioned Fed independence under persistent political pressure.

 ETF flows turned positive, with $300 million into preferred ETFs and strong inflows across IG credit. August supply reached $7.2 billion, bringing YTD issuance to $76 billion—a 35% year-over-year increase—including bank, utility, energy and insurance hybrids.