JPT - Preferreds CEF Sector Adds Borrowings To Boost Income

• A recovery in credit spreads and a drop in Treasury yields have buoyed the prices of preferred stocks and sector CEF NAVs.
• This has allowed preferred CEFs to increase borrowings this year which drives higher income levels and strengthens distribution coverage.
• In particular, the Flaherty, Nuveen, and First Trust preferreds CEFs have added to borrowings recently which will support income and coverage in the medium term.
• Over the longer term, the preferreds sector faces a number of headwinds of high-coupon stock refinancings, low reset yields, and rising short-term rates.

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