Top of the Morning: Summer rally setup for preferreds
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Frank drops by for a performance update and outlook for the preferreds market, including a look at positioning considerations and recommendations, and what to be mindful of when it comes to the interest rate environment. Featured is Frank Sileo, Senior Fixed Income Strategist Ame
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4 itemsTop of the Morning: Summer rally setup for preferreds
The desk believes a summer rally in preferred securities is likely due to emerging trends of improved relative value, favorable interest rate expectations from the Chief Investment Office (CIO), and historical mean reversion dynamics. Per the full note from UBS, Senior Fixed Income Strategist Frank Saleo highlights the recent performance divergence between $25 par and $1,000 par preferreds as a significant factor supporting this forecast. Key data from UBS indicates that market positioning appears conducive for $25 par preferreds as investors anticipate a return toward historic balance. This is underscored by their analysis of interest rate behavior in 2023, where shifts could catalyze investment flows back to these securities. The clock is ticking towards summer, a traditionally strong season for these financial instruments.