Preferred stocks falter in post-holiday trade; Gabelli issue lists; Deutsche under pressure

By Stephanie N. Rotondo

Seattle, July 5 – The first trading day after the long Fourth of July weekend was trending weaker for the preferred stock market on Tuesday.

However, the space did manage to pare some losses.

The Wells Fargo Hybrid and Preferred Securities index closed down 19 basis points. The index was off 21 bps at mid-morning.

A trader said the declines were due to investors looking for safety in the wake of the United Kingdom’s Brexit decision.

“The long bond is sky-rocketing,” he noted.

But the Brexit could keep domestic interest rates lower for longer than previously thought, he speculated, which could in turn result in an active new issue calendar.

The trader also opined that redemptions could become all the rage, as well.

As for the day’s dealings, Gabelli Dividend & Income Trust’s $100 million of 5.25% series G cumulative preferred stock began trading on the New York Stock Exchange on Tuesday.

The ticker is “GDVPG.” Paper was trading at $25.30 at mid-morning, down from opening levels of $25.40. The preferreds finished at $25.35.

The deal came June 28 at the tight end of the 5.25% to 5.375% price talk.

Meanwhile, a trader said a $25 million greenshoe on National General Holdings Corp.’s $175 million offering of 7.5% series C noncumulative preferreds had been exercised, increasing the total outstanding to $200 million.

Those preferreds were also trading at $25.30 at mid-morning, though that was unchanged from Friday. The issue held there through the end of the day.

The issue priced June 29. The preferreds are trading under a temporary symbol, “NTTNP.”

Deutsche Bank declines

Deutsche Bank AG’s trust preferreds remained under pressure on Tuesday due in part to a report from the International Monetary Fund that deemed the German institution the riskiest globally significant bank.

The 7.6% TruPs (NYSE: DTK) declined 8 cents to par, while the 8.05% TruPs (NYSE: DKT) dropped 14 cents to $25.28.

Deutsche’s common equity was also faltering, hitting nearly all-time lows. The stock (NYSE: DB) lost 51 cents, or 3.67%, to close at $13.40.

Last week, the Federal Reserve released the CCAR results of 33 banks, Deutsche Bank being one of the firms. Of the 33, only Deutsche and Santander saw their capital plans fully rejected.

Come Thursday, the IMF issued its own report on the stability of the German financial space. In that report, the agency said that Deutsche – due to its highly interconnected nature of doing business – presented “the most important net contributor to systemic risks, followed by HSBC and Credit Suisse.”

Those reports, combined with Brexit concerns, have sent the preferreds reeling.

In the first quarter of 2016, Deutsche reported a nearly 58% decline in profits, due to lower revenues and higher loan provisions.

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