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Fixed-To-Floating Preferred Stocks And Units Complete Review



  • Fixed-to-floating preferreds and units sorted into groups.
  • How does the yield curve look?
  • What has changed in the past month?
  • I do much more than just articles at Trade With Beta: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »


In this monthly article, I review the fixed-to-floating rate preferred stocks and units, sorted into several categories. There are 105 issues in our database that trade on primary exchanges. Out of all 105 securities, there are none that are callable, as there are only two issues' call dates that occur this year, CUBI.PC and NGLS.PA. Maybe the most important ETF for this type of security is the Invesco Variable Rate Preferred ETF (VRP). As we can see in the charts below, despite the fact that more than half of the holdings are corporate bonds, which occupy 70% of the market capitalization of the fund, still, with $461M in preferred stocks, VRP has no analog with regard to floating-rate securities.

Source: Author's spreadsheet

However, when we are talking about fixed-income ETFs, the influence of the iShares U.S. Preferred Stock ETF (PFF), the Invesco Financial Preferred ETF (PGF), and the Invesco Preferred Portfolio ETF (PGX) should not be underestimated, as, with a total of $23.5B of preferred stocks and baby bonds, they are the benchmark of this market. We are continuously monitoring all preferred stocks by several groups and will reinstate our Monthly Review, publishing a recap of the groups of interest.

First, let's take a look at the main indicators that we follow and their behavior during the last month.

CBOE 10-Year Treasury Note Yield Index (TNX)

Source: TradingView.com

Invesco Variable Rate Preferred ETF

Source: TradingView.com

SPDR S&P 500 Trust ETF (SPY)

Source: TradingView.com

Crude Oil Monthly chart

Source: TradingView.com

Currently, the main driving force for all exchange-traded securities continues to be the rapidly-expanding-around-the-world coronavirus, COVID-19, increasing the risk of a pandemic. After the turbulent last week of February, where the S&P 500 has dropped a total of 11.5% for the week, making its worst one since the Great Recession, markets continue to

Trade With Beta

The Trade With Beta team has been submerged in the universe of preferred stocks and baby bonds for almost a decade, and we decided to share our knowledge and expertise through the inception of this service. We attempt to cover all aspects of these products, from IPOs to pair trades and portfolio picks and, last but not least, issues. Additionally, once a month, we go through all different groups of fixed-income instruments to make sure that nothing has gone unnoticed.

This article was written by

Arbitrage Trader profile picture

Arbitrage Trader, aka Denislav Iliev has been day trading for 15+ years and leads a team of 40 analysts. They identify mispriced investments in fixed-income and closed-end funds based on simple-to-understand financial logic.

Denislav leads the investing group Trade With Beta, features of the service include: frequent picks for mispriced preferred stocks and baby bonds, weekly reviews of 1200+ equities, IPO previews, hedging strategies, an actively managed portfolio, and chat for discussion. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (7)

Any opinions on the huge drops in all the preferreds lately? Opportunity or is there something I'm missing?
Gridbird profile picture
@JayLee71, There is an old negative saying on preferreds and why many dont buy...They are the worst of both worlds. They trade like stocks when stock market is bad and trade like bonds when the bond market is bad...Mix poor investment sentiment, economic upheaval, and potential credit risk and there ya go. Yes some are incredibly cheap, you just have to pick the ones that will survive the crunch. I havent walked too far off the plank buying quality ute preferreds that have dropped recently. They arent the ones that have been halved like many have. I just dont trust the capital structures of most but concede that is where the cap gains are at.
mjtroll1 profile picture
take a look at pgx.. close below 12.10 implies signficantly lower prices... these cefs are all trading 1 to 4 sigma cheap to their index represented by pgx DFP, PDT, HPS.. FFC and FLC 1 sigma all on multiyear horizons
mjtroll1 profile picture
arb trader ..have been very active in cef space..would welcome quick comment with maybe a trade or two
EdT.cpa_Retired profile picture
I started shifting funds up the "investment rating" ladder in the last couple weeks, eliminating all BBB- and below issues, and limiting exposure to BBB and BBB+ issues. I have also become VERY selective with non-rated issues. This was primarily based on the belief that if we do slide into a recession, much of the lower end of the investment grade scale will quickly be re-rated to non-investment grade, with an accompanying hit to price.
MrFireby2023 profile picture
A.T. Great article, very informative. Do you follow HMLP.A? Is it worthy of investment?
NV_GARY profile picture
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