Strategy’s (MSTR) Stride Junior Preferred Stock (STRD) saw its credit spread narrow further late last week, possibly highlighting strong demand for the company’s higher-yield preferred offering.
The spread between the yield on the STRD and the 10-year US Treasury bond fell to a new low of 8.12% on December 12, according to Bitcoin for Corporate data (the spread widened again to around 9% on Monday as bitcoin fell below $86,000).
A credit spread represents the additional yield investors need to own a riskier security, such as a bond or preferred stock, rather than a low-risk benchmark such as the 10-year U.S. Treasury.
This latest data for STRD continued what has been a steady decline since mid-November. A narrowing of the STRD-Treasury spread could typically indicate increased investor demand and improved perceptions of credit quality.
Investors may be re-evaluating Strategy’s financial position and bitcoin-focused business model, viewing STRD as more stable than before and therefore demanding a lower premium on government debt.
Additionally, in early December, Strategy bolstered the credit profile of its preferred securities by establishing a reserve of $1.44 billion, covering more than 21 months of dividends, while continuing to accumulate bitcoin, increasing the balance sheet collateral backing the preferred shares.
Why STRD’s effective performance is striking
The performance gap between STRD and Strategy’s more senior preferred offerings has resurfaced in market commentary. At current price, STRD offers a yield premium of approximately 320 basis points over another preferred series, STRF, even though both instruments have similar declared dividend rates.
As CoinDesk reported on October 20, Michael Saylor at the time dismissed concerns about potential non-payment of dividends for the more junior offering on the basis that not paying STRD dividends was not a viable option.
Strategy’s chief executive argued that the yield gap between the two instruments reflected a credit spread driven by capital stack positioning rather than fundamentals. Strategy had introduced STRD six months ago as part of a broader effort to build a structured yield curve that ranges from relatively conservative income products to higher-risk exposures tied to its bitcoin-focused balance sheet.
STRD’s record issuance stands out in historical context
Strategy on Monday morning revealed that it raised $82.2 million from the sale of approximately 1 million STRD shares through its exchange program during the week ending December 14. Junior preferred accounted for the vast majority of preferred stock issuance during the period, with STRF contributing $16.3 million, minimal STRK issuance and no STRC sales.
Weekly ATM issuance data compiled by crypto analyst Chris Millas, based on Strategy’s public disclosures since March 17, show that this latest STRD issuance represented the largest weekly gains among the company’s preferred stock offerings. The chart below illustrates that while issuance has rotated between STRF, STRK, STRD and STRC over time, recent weeks have been dominated by STRD, marking a clear shift toward the company’s higher-yielding junior preferred shares.
