Rising corporate earnings in the banking industry are boosting preferred stock yields. Tax yields investing advocates note that bank-issued preferreds can offer both income stability and favorable tax treatment under current legislation. To reflect these trends, we made targeted adjustments in the 1–5 year segment, removing lower-quality names while trimming exposure to the housing and prepaid gas sectors, mirroring short-term SMA and retail buying patterns. At the short end, the end yield doesn’t justify a muni position, even for tax bracket investors. Heavy supply has weighed on the municipal market this year, particularly at the back end of the curve. Supply is up more than ~15% year-over-year, with the back end seeing a roughly 22% year-over-year increase, and a 50% increase relative to the five-year average. 1 This heavier supply has affected the municipal bond market in different ways across the yield curve. Latest market data shows tax yields investing strategies gaining traction as treasury yields hover near 4.32%, impacting equity valuations. Investors are rotating into dividend-paying stocks in sectors resilient to rate pressures, like utilities and consumer staples. Analysts forecast stable yield spreads through Q3, supporting long-term portfolio diversification.
