Preferred stock investors gun-shy following midweek sell-off; Qwest, Deutsche end higher

By Stephanie N. Rotondo

Seattle, May 18 – The preferred stock market was “in a holding pattern” on Thursday, according to one Chicago-based sellside source.

“I think everybody just decided, ‘Hey, we had a one-day sell-off; let’s take a vacation,’” the source said.

The source was referring to Wednesday’s losses, which were largely attributed to concerns about the viability of Donald Trump’s presidency.

But another market source opined that, by comparison to its straight equity counterparts, “$25-par preferreds were relatively unchanged [on Wednesday]. So there was no need for a major rebound today.”

As for Thursday’s dealings, the Wells Fargo Hybrid and Preferred Securities index dipped 8 basis points. The U.S. iShares Preferred Stock ETF was off 21 bps.

With the market losing ground, so were Capitala Finance Corp.’s 6% $25-par notes due 2022.

However, a trader said there weren’t many markets for the deal, which priced on May 10.

The notes were bid for at $24.95 versus bids of par to $25.05 on Wednesday.

Another source said the day’s volume weighted average price was $25.098, though the notes technically closed at $25.32.

He also noted that there was “very low volume” in the paper.

Among listed issues, liquidity was also rather limited.

Qwest Corp.’s 6.75% $25-par notes due 2057 (NYSE: CTDD), however, bucked the day’s downward trend, rising 2 cents to $25.02.

Deutsche Bank AG’s 6.55% trust preferred securities (NYSE: DXB) were also moving up, adding a dime to close at $25.05.

Morgan Stanley & Co. Inc.’s 5.85% series K fixed-to-floating rate noncumulative preferreds (NYSE: MSPrK) weren’t as lucky, though. The preferreds declined 19 cents to $26.41.

Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were also lower, though not nearly as active as they tend to be.

The issue fell 31 cents, or 4.59%, to $6.44.

And, Ally Financial Inc.’s 8.125% series 2 fixed-to-floating rate trust preferred securities (NYSE: ALLYPrA) dipped a dime to $25.33.

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