{"id":10565,"date":"2010-04-21T11:04:47","date_gmt":"2010-04-21T15:04:47","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=10565"},"modified":"2010-04-21T11:04:47","modified_gmt":"2010-04-21T15:04:47","slug":"heinzl-why-preferreds-are-falling-but-corporate-bonds-arent","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=10565","title":{"rendered":"Heinzl: Why preferreds are falling but corporate bonds aren't"},"content":{"rendered":"

John Heinzl was kind enough to quote me in today’s Globe and Mail<\/i> in his Investor Clinic<\/a>:<\/p>\n

I’m a retired and experienced investor. Some months ago I invested a sizable amount of money in preferred shares of major banks, the rationale being that it would be a safe haven for the cash and produce a steady stream of dividends. They have fallen sharply over the last few weeks. Why?<\/b><\/p>\n

The facile explanation is that interest rates are rising, so straight preferred shares \u2013 which trade much like long-term bonds \u2013 are falling. But preferred share expert James Hymas of PrefLetter.com says the tumble in preferreds has more to do with emotion than interest rates.<\/p>\n

Short-term rates are indeed rising \u2013 the Bank of Canada all but confirmed yesterday that it will hike its benchmark rate on June 1. But long-term corporate bond yields \u2013 which are far more important to the preferred share market \u2013 are not.<\/p>\n

\u201cLong corporate yields have been fairly steady. They have been bouncing around at basically 6 per cent to a little under for the all this year. So whatever concerns there might be about rising interest rates, they’re not being shared by the corporate bond market,\u201d Mr. Hymas says.<\/p>\n

So why are preferred shares falling while long corporate bonds are not?<\/p>\n

The corporate bond market is large and dominated by institutional investors such as pension funds and insurance companies that take a long-term view. The preferred market, on the other hand, has a bigger retail presence and many issues are comparatively illiquid. This makes preferred prices more volatile, particularly when retail investors start getting nervous \u2013 like now.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

John Heinzl was kind enough to quote me in today’s Globe and Mail in his Investor Clinic: I’m a retired and experienced investor. Some months ago I invested a sizable amount of money in preferred …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19],"tags":[],"class_list":["post-10565","post","type-post","status-publish","format-standard","hentry","category-press-clippings"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/10565","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10565"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/10565\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10565"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10565"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10565"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}