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Morning Commentary: Preferreds in retreat; First Republic lists; European banks decline
By Stephanie N. Rotondo
Seattle, Feb. 11 – Preferred stocks resumed their downward trajectory on Thursday after rebounding slightly in the previous session.
The midweek rally came as Federal Reserve chairman Janet Yellen told a House committee that the U.S. was showing signs of growth, providing support for the central bank’s plan to gradually increase interest rates. However, Yellen noted that global economic risks remain and that the Fed intended to keep an eye on those developments and how they impacted domestic economic strength.
But any inspiration Yellen hoped to give the markets appeared short-lived, as “everything is getting smoked” in Thursday trading, a trader said.
The trader noted that a key driver of the losses was “fears on China again.”
The trader also commented that “if Yellen is telling the truth and our banks are as strong as they say they are,” it is actually a good time for investors to step into play.
“But it’s tough to convince people to get their feet back in the water,” he said.
The Wells Fargo Hybrid and Preferred Securities index was down 168 basis points at mid-morning. The index ended Wednesday’s session up 82 bps.
Among recently priced deals, a trader said First Republic Bank’s $150 million of 5.5% series G noncumulative perpetual preferreds listed on the New York Stock Exchange.
The ticker is “FRCPG.” The deal priced Feb. 3.
The trader quoted the issue at $24.25 bid, $24.50 offered.
Meanwhile, European banks fell in line with the broader market trend, erasing the gains incurred on Wednesday.
Barclays Bank plc’s 8.125% series 5 noncumulative callable dollar preference shares (NYSE: BCSPD) dropped 66 cents, or 2.6%, to $24.69, while Deutsche Bank AG’s 7.6% trust preferred securities (NYSE: DTK) declined 74 cents, or 3.3%, to $21.81.
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