Market declines after FOMC comments; Full Circle launches notes sale; financials active

By Stephanie N. Rotondo

Phoenix, June 19 - The preferred stock market was in a bit of a holding pattern on Wednesday, as investors were awaiting an announcement from the Federal Reserve's Federal Open Market Committee later in the day.

"We're just waiting to see what the Fed says," a trader remarked. "That's going to dictate where this market goes."

The Federal Reserve chairman Ben Bernanke said in a press conference that the central bank's bond-buying program could begin to taper off in the next year, with a goal of ending completely in 2014. News of the tapering was largely expected, but the timeline details were new, sending the overall market into a tailspin.

As the equity markets and Treasuries pulled back, so did the preferred space, though it was "not very apparent why," a market source said.

The source noted that nothing the FOMC said was "all that negative."

"Maybe the market just got a little ahead of itself ahead of the announcement," he opined, adding, "Sometimes you don't have answers."

In the primary arena, Full Circle Capital Corp. launched an offering of at least $30 million $25-par notes due 2020.

The company had originally proposed the sale on May 2, with $25 million notes expected to price.

A trader said price talk was 8% to 8.25%, though he had not seen any markets in the non-rated deal.

"These small deals just get put away," he said.

The deal had not priced as of the market's close.

In the secondary, Citigroup Inc.'s 6% trust capital securities (NYSE: CPS) were trading actively between par and $25.01. A trader said the activity could be due to a belief that the issue will be the next to be called.

"All of these [Citigroup] issues are callable at any time," he said. "There's really no upside on this. But if you are worried about rates, this could be a good place to put money if you think it is going to be called."

But another source said the activity was not all that unusual, seeing the issue end down a penny at $24.99.

Financials fall post-FOMC

The dip in the preferred market was again felt the most among financials, which were once again the day's most actively traded issues.

Ally Financial Inc.'s 8.125% series 2 fixed-to-floating rate trust preferreds (NYSE: ALLPA) declined by 34 cents to end at $25.80.

JPMorgan Chase & Co. meantime had two issues in the top five, its 5.5% series O noncumulative preferreds and its 5.45% series P noncumulative preferreds.

Both issues were off a nickel, with the 5.5% preferreds at $24.15 and the 5.45% preferreds at $23.92.

Deutsche Bank's 6.625% noncumulative trust preferred securities (NYSE: DTT) were also weaker, falling 9 cents to $25.40.

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