The market considers preference shares to be a debt security because the dividend payment is a fixed financial obligation and has credit ratings like bonds.

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Preference shares are actually a type of equity security, not a debt security, despite having characteristics similar to both stocks and bonds. While they have a fixed dividend payment, they do not have a set maturity date and do not represent a legal obligation to make payments like bonds do. Additionally, preference shares do not have credit ratings like bonds, as they are not considered a debt obligation.

The Market Considers Preference Shares to Be a Debt Security