Preferreds give up early gains; Citigroup new deal nearly doubled; Qwest notes free up

By Stephanie N. Rotondo

Seattle, Jan. 26 – Preferred stocks were rallying early Tuesday as the market shook off concerns about China. However, the preferred space eventually gave back nearly all of the gains by the bell.

“People aren’t scared,” a trader said early in the day, adding that a bounce in oil prices was also likely fueling the rebound.

The Wells Fargo Hybrid and Preferred Securities index closed up 2 basis points. The index was up 22 bps at mid-morning.

A market source said he saw no reason for the sell-off.

The primary market continued to see deals added to the calendar as Citigroup Inc. announced a $500 million offering of series S noncumulative perpetual preferreds.

The deal was then upsized to $900 million and came at 6.3%, tighter than the 6.375% price talk.

A trader saw the issue at $24.77 in the gray market.

“It will probably free tomorrow morning,” a market source noted.

Citigroup Global Markets Inc. is the bookrunning manager. Joint lead managers include BofA Merrill Lynch, Morgan Stanley & Co. LLC, Goldman Sachs & Co., RBC Capital Markets LLC, Wells Fargo Securities LLC, J.P. Morgan Securities LLC and UBS Securities LLC.

Among other recent deals, Qwest Corp.’s $235 million of 7% $25-par notes due 2056 – a deal from Monday’s business – freed to trade early in the session, a trader said.

At the close, a source saw the notes at $24.88.

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