Annaly Capital's floating-rate preferreds offer a low-risk pair trade amid market volatility.

Annaly Capital Management highlights a pair trade opportunity between its floating-rate preferred stocks NLY-G and NLY-I, exploiting current mispricing due to market volatility. With rising benchmark yields and falling equity markets, credit spreads are expected to widen, making NLY-G overvalued relative to NLY-I. The recommended strategy is to short NLY-G and go long on NLY-I, which is considered virtually credit risk-free with manageable drawdown. This trade should be closed if market volatility and yields decrease.