Morgan Stanley Series A: True Perpetual Preferred Shares, 5.9% Yield

Summary:

• Morgan Stanley’s Series A preferred shares are unlikely to be called, making them a true perpetual security due to their advantageous coupon structure.
• Preferred shares offer better protection than CoCo bonds in stressed market conditions, as CoCos can incur losses even if preferred shares remain unaffected.
• MS.PR.A’s hybrid coupon structure makes it less susceptible to interest rate fluctuations but highly sensitive to credit spreads, posing significant market risk.
• Given historically tight spreads, MS.PR.A is not attractive currently; a -10% drawdown is needed for yields to become enticing.

Thesis

Morgan Stanley (NYSE:MS) is an international investment bank that falls in the Tier 1 institutions category. Morgan finances itself via a plethora of capital markets instruments, one of them being preferred shares. Preferred equity is senior to common equity. Preferred

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