Strategy’s ( MSTR ) junior preferred stock Stride ( STRD ) saw the credit spread tighten further late last week, possibly highlighting strong demand for the company’s highest-yielding preferred offering.
The spread between the yield on the STRD and the US 10-year Treasury bond fell to a new low of 8.12% per December 12, according to data from Bitcoin for Corporations (the spread has widened back closer to 9% on Monday as bitcoin fell below $86,000).
A credit spread represents the additional return investors require to own a riskier security, such as a bond or preferred stock, rather than a low-risk benchmark such as the US 10-year Treasury.
This latest data point for STRD continued what has been a steady decline since mid-November. A falling spread of STRD to the treasury can typically signal stronger investor demand and improved perceptions of credit quality.
Investors may be reassessing Strategy’s financial position and bitcoin-centric business model, seeing STRD as more stable than before and therefore demanding a smaller premium over sovereign debt.
Strategy also strengthened the credit profile of its preferred securities earlier in December by establishing a $1.44 billion reserve covering more than 21 months of dividends, while continuing to accumulate bitcoin, adding to the safety of the balance sheet backing the preferred shares.
Why STRD’s effective yield is attracting attention
The dividend gap between STRD and Strategy’s more senior preferred offering has resurfaced in market commentary. At current pricing, STRD offers a yield premium of about 320 basis points over another preferred series, STRF, despite both instruments having similar yield 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 grounds that not paying STRD’s dividend was not a viable option.
The strategy’s executive chairman 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-centric balance sheet.
Record STRD issuance stands out in the historical context
Strategy on Monday morning disclosed that it raised $82.2 million from the sale of about 1 million shares of STRD through its at-the-market program during the week ending Dec. 14. Junior preferred accounted for the vast majority of preferred stock issuance during the period, with STRF contributing $16.3 million, minimal issuance by STRK, and no STRC sales.
Weekly ATM issuance data compiled by cryptoanalyst Chris Millas, based on Strategy’s public disclosures since March 17, shows that this latest STRD issuance represented the largest one-week dividend to date 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 towards the company’s highest-yielding junior preferred stock.
