San Francisco, California – Investors are closely monitoring the preferred stock and baby bond markets, with all sectors experiencing a downturn in the third week of April. Despite the overall decline, utilities and energy sectors have shown resilience for distinct reasons.
Market spreads have recently increased after a period of steady decline, making the sector more attractive for potential investments. The shift in spreads above 2% is seen as a positive sign for new capital influx.
In terms of market themes, the spotlight has been on the mortgage REIT preferred CIM.PR.B, which recently transitioned to a floating rate. This change in coupon rates can complicate the evaluation process for investors, as it impacts the yield calculations for these securities.
To address the issue of fluctuating coupon rates, experts suggest looking at a concept called “Float Yield” to better gauge the accruing yield based on current short-term rates. This approach provides a more accurate representation of the actual yield for stocks with newly introduced floating rates.
In another development, Mortgage REIT MFA Financial has introduced a new baby bond – the 9% 2029. This move is part of the company’s strategy to leverage the current rise in asset prices by adding liabilities while keeping leverage relatively stable.
The issuance of new bonds by MFA Financial is seen as a way to diversify its liabilities, moving away from solely depending on financing agreements. The shift towards unsecured debt issuance is viewed favorably by bondholders, as it reduces the claims of secured creditors and allows for greater flexibility in asset allocation.
In conclusion, the preferred stock and baby bond markets continue to be dynamic, with shifting trends and evolving strategies by companies like MFA Financial to capitalize on market conditions. As investors navigate these changes, staying informed about market developments and understanding the implications of new financial instruments will be key to making informed investment decisions.
