European woes continue to hammer preferred market; ING Groep, Deutsche Bank bear the brunt

By Stephanie N. Rotondo

Portland, Ore., Sept. 9 - Preferred stocks were having a "rough day," a trader said Friday, as the European market was "tanking."

"That kind of hurt everything, and we've been down ever since," he said, referring to the resignation of Germany's top representative, Jürgen Stark, who left his post at the European Central Bank in protest of the euro zone's latest bond-buying spree.

The exit made investors worry that a European default could be imminent if a plan with Germany's backing could not get done. Adding insult to injury, rumors were circulating that "Germany is setting up a Plan B to insulate their banks in the event of a [European] default."

"People are spooked with Greece," said another trader. "So we didn't see a lot of customer flow and we didn't see a lot of volume."

"Euro banks were definitely hurt more than domestics," a trader said. None more so than ING Groep NV - which began tanking Thursday for reasons that remain unclear - and Deutsche Bank AG.

In new issues, Digital Realty Trust Inc.'s new 7% series E preferreds, which priced Thursday, were doing remarkably well, given the conditions of the broader market.

ING weighed on again

ING Groep's preferreds continued to get knocked down amid European economic concerns, but traders were perplexed as to why that name was suffering more than others.

"European stuff is obviously getting hammered," a trader said. However, "I still don't know why" ING is getting singled out.

The 8.5% perpetual hybrid capital securities (NYSE: IGK) were the most active of the ING complex, and they dropped 62 cents, or 2.59%, to $23.34. The 7.05% perpetual debt securities (NYSE: IND) were down the most on a percentage basis, falling 58 cents, or 2.86%, to $19.67.

Deutsche Bank gets clocked

Deutsche Bank was another foreign issuer getting hit and, as with ING, traders were not sure if there was something specific besides the overall European debacle that was driving it lower.

The 7.6% trust preferreds (NYSE: DTK) were Deutsche Bank's most active issue. The trust preferreds dropped 28 cents, or 1.16%, to $23.86. The 6.375% non-cumulative trust preferreds (NYSE: DUA) fell the most in terms of percentage, closing 52 cents weaker, or 2.38%, at $21.35.

Digital Realty doing well

Digital Realty Trust's recently priced $250 million issue of 7% series E cumulative redeemable perpetual preferreds was "holding in there," a trader said.

He said the paper was "hanging just below par."

"I was kind of surprised they were able to have some pricing power," he said. But the deal reportedly "went pretty well. It seemed to be well received." He noted that the books closed "pretty early."

"REITs are doing much better [than the general market] it seems," he said.

Digital Realty is based in San Francisco.

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