Preferred trading subdued as Fed, rates remain in focus; rumor of Citi deal circulates

By Stephanie N. Rotondo

Seattle, Oct. 26 – The preferred stock market was moving up modestly Monday despite what one market source called “really light” volume.

The Wells Fargo Hybrid and Preferred Securities Index finished 18 basis points higher. Given the limited liquidity, the source said the gain “just means there is not an incredible amount of sellers out there.” As such, “it doesn’t mean that is where the market would end up being if there had ben heavier volume.”

As for the lighter volume, one trader pointed to investors’ concerns about Europe as well as the ongoing Federal Reserve interest rate saga.

The trader commented that different theories about the Fed’s looming rate increase continued to circulate. Some players, the trader said, are still predicting that rates will be upped, though expectations are that the increase will only be about an eighth of a percent. Others are opining that economic data will be the key to the central bank’s next move – though recent housing start figures were “a bad sign,” possibly indicating that an increase will be delayed.

“Some think the Fed may announce a moratorium on the liftoff,” the trader said. “If that is the case, everything that is tied to it could jump through the roof as people reach for yield.”

Away from FedWatch, the primary market was quiet as the week started.

However, a trader said there was “a rumor of a [Citigroup Inc.] deal this week, but I don’t know if that is going to be the case.”

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