Preferred market rises with Treasuries; KeyCorp’s new issue trades well; DTE Energy eyed

By Stephanie N. Rotondo

Seattle, Dec. 7 – The preferred stock market was firming up on Wednesday, though it was “not a rip-your-face-off rally, by any means,” a trader said.

The Wells Fargo Hybrid and Preferred Securities index improved 28 basis points by day’s end. The index was up 23 bps at mid-morning.

The trader attributed the rise in preferreds to gains in the bond market. Treasuries were experiencing “a bit of a dead-cat bounce on the likelihood that the European Union will continue” its quantitative easing program.

“There is still enough weakness in the global market that QE is still out there,” the trader commented.

In new issues, KeyCorp’s $500 million of 6.125% series E fixed-to-floating rate noncumulative preferreds – a deal priced Monday and freed on Tuesday – were “moving up nicely,” according to one trader.

The trader said the paper was trading “right around” $25.35.

“They have been doing quite well,” another market source commented. “They traded in a narrow range.”

The source said the paper finished at $25.36, which he noted was at the “slightly low end of the range.”

That was up 10 cents day over day, but 11 cents from the open.

Nearly 1.95 million of the preferreds changed hands.

The preferreds have also been assigned a temporary trading symbol, “KYYPP.”

Price talk was in the 6.25% area. The deal was upsized from $250 million.

Meanwhile, DTE Energy Co.’s $280 million of 6% $25-par 2016 series F junior subordinated debentures due 2076 were holding in a $24.30 to $24.35 range, a trader said.

At the bell, the debentures were seen at $24.44, though volume was “not heavy,” according to one source.

The issue – which came Nov. 28 – is scheduled to list on the New York Stock Exchange on Thursday under the ticker symbol “DTY.”

In secondary trading, a trader noted that Fannie Mae and Freddie Mac preferreds were “inching up again.”

The GSE-linked paper has been trending mostly higher since the Nov. 8 election but has seen pockets of softness this week.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) rose 50 cents, or 6.17%, to $8.60. Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) improved 30 cents, or 3.85%, to $8.10.

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