Strategy’s STRD credit spread has tightened over past month even as bitcoin struggles

• STRD’s credit spread versus the U.S. 10-year Treasury narrowed to a new low on Friday.
• Strategy sold $82.2 million of STRD through its ATM program in the week ended Dec. 14, the largest weekly issuance since launch.
• Historical ATM data shows STRD has recently dominated preferred issuance among Strategy’s offerings.

Strategy’s (MSTR) junior preferred stock Stride (STRD) saw its credit spread tighten further at the end of last week, possibly highlighting strong demand for the company’s highest-yielding preferred offering.

The spread between the yield of STRD and that of the U.S. 10-Year Treasury Note fell to a new low of 8.12% as of Dec. 12, according to data from Bitcoin for Corporations (the spread has widened back closer to 9% on Monday as bitcoin tumbled 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 like the U.S. 10-year Treasury.

This latest data point for STRD continued what's been a steady decline since mid-November. A shrinking STRD to Treasury spread might typically signal stronger investor demand and improving perceptions of credit quality.

Investors may be reassessing Strategy’s financial position and bitcoin-centric business model, viewing STRD as more stable than before and therefore demanding a smaller premium over government debt.

Also, Strategy earlier in December bolstered the credit profile of its preferred securities by establishing a $1.44 billion reserve, covering more than 21 months of dividends, while continuing to accumulate bitcoin, which has increases balance sheet collateral supporting the preferred stocks.

Why STRD’s effective yield is drawing attention

The yield gap between STRD and Strategy’s more senior preferred offerings has resurfaced in market commentary. At current pricing, STRD offers a yield premium of roughly 320 basis points over another preferred series, STRF, despite both instruments carrying similar stated dividend rates.

As CoinDesk reported on Oct. 20, Michael Saylor at the time dismissed concerns about potential non-payment of dividends for the more junior offering on the basis that failing to pay STRD's dividends was not a viable option.

The Strategy 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 spanning 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 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 ended Dec. 14. The junior preferred accounted for the vast majority of preferred-stock issuance during the period, with STRF contributing $16.3 million, minimal issuance from STRK 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-ever single-week proceeds among the company’s preferred stock offerings. The chart below illustrates that while issuance has rotated among STRF, STRK, STRD and STRC over time, recent weeks have been dominated by STRD, marking a clear shift toward the company’s highest-yielding junior preferred stock.

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