Strategy’s (MSTR) Stride Junior Preferred (STRD) saw its credit spread tighten further late last week, perhaps highlighting strong demand for the company’s highest-yielding preferred offering.
The spread between the yield of STRD and that of the 10-year U.S. Treasury note fell to a new low of 8.12% on Dec. 12, according to data from Bitcoin for Corporations (the gap widened again closer to 9% on Monday as bitcoin fell below $86,000).
A credit spread represents the additional yield investors need for holding a riskier security, such as a bond or preferred stock, rather than a lower-risk benchmark like the 10-year U.S. Treasury.
This latest data point for STRD continues a steady decline since mid-November. A decrease in the STRD-Treasury spread can generally signal stronger investor demand and improved perceptions of credit quality.
Investors could reevaluate Strategy’s financial situation and its bitcoin-centric business model, viewing STRD as more stable than before and therefore demanding a lower premium over government debt.
Additionally, Strategy strengthened the credit profile of its preferred securities in early December by establishing a $1.44 billion reserve, covering over 21 months of dividends, while continuing to accumulate bitcoin, increasing the balance sheet collateral supporting the preferred securities.
Why effective STRD yield attracts attention
The yield gap between STRD and Strategy’s more senior preferred offerings has resurfaced in market commentary. At current prices, STRD offers a yield premium of approximately 320 basis points over another preferred series, STRF, even though both instruments feature similar declared dividend rates.
As CoinDesk reported on October 20, Michael Saylor then dismissed concerns about the potential non-payment of dividends for the most junior offering, on the grounds that non-payment of dividends from STRD was not a viable option.
The strategy’s executive chairman argued that the yield spread between the two instruments reflected a credit gap driven by capital positioning rather than fundamentals. Strategy had introduced STRD six months ago as part of a broader effort to build a structured yield curve ranging from relatively conservative income products to higher-risk exposures tied to its bitcoin-centric balance sheet.
STRD’s record-breaking broadcast stands out in historical context
Strategy revealed Monday morning that it raised $82.2 million from the sale of approximately 1 million shares of STRD through its exchange program during the week ended December 14. Junior preferred stock accounted for the vast majority of preferred stock issuance during the period, with STRF contribution of $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, shows that this latest STRD issuance represented the largest weekly proceeds ever among the company’s preferred stock offerings. The chart below shows that although issuance has alternated between STRF, STRK, STRD, and STRC over time, the past few weeks have been dominated by STRD, marking a clear shift toward the company’s highest-yielding junior preferred shares.
