Preferreds sell off ahead of holiday, end up from day’s lows; Capital One Financial slips

By Stephanie N. Rotondo

Seattle, Nov. 23 – Preferred stocks were “selling off,” a trader said Wednesday, amid fresh economic data that suggested an interest rate increase in December was a sure thing.

The trader also speculated that “maybe people are exiting investment grade for high yield.”

The Wells Fargo Hybrid and Preferred Securities index finished off 12 basis points, though it was down as much as 46 bps at mid-morning.

U.S. durable goods demand increased 4.8% in October, according to a Commerce Department report. The figure was due to gains in demand for commercial aircraft.

Excluding aircraft demand, orders were up 0.4%, which was still better than the 0.3% gain expected by analysts polled by Bloomberg.

As for the day’s dealings, recently priced deals initially came in with the market.

Capital One Financial Corp.’s $500 million of 6% series H noncumulative preferreds – a deal that priced on Monday – ended down 11 cents at $24.77.

The preferreds were quoted at $24.75 bid, $24.85 offered at mid-morning.

Another source placed the issue at $24.75, down 13 cents in early trading.

The paper is trading under a temporary ticker, “CFFFP.”

The issue came upsized from $200 million and tight to the 6.125% price talk.

BofA Merrill Lynch, J.P. Morgan Securities LLC, UBS Securities LLC, Morgan Stanley & Co. LLC and Wells Fargo Securities LLC ran the books.

Meanwhile, NuStar Energy LP’s $200 million of 8.5% series A fixed-to-floating rate cumulative redeemable perpetual preferred units were seen holding in a par to $25.10 context in early dealings. However, the issue bucked the day’s weaker trend, rising 28 cents, or 1.11%, to $25.40.

The deal came Thursday, upsized from $100 million and in line with price talk. The units begin to float on Dec. 15, 2021 at Libor plus 676.6 basis points. The issue freed to trade Friday afternoon.

The units are trading under a temporary symbol, “NTSRF.”

Away from the new issues, GSE preferreds continued to take focus.

Like the NuStar issue, Fannie Mae and Freddie Mac also bucked the day’s downward trend.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FNMAS) rose 13 cents, or 2.14%, to $6.20, while the 6.75% series Q noncumulative preferreds (OTCBB: FNMAI) added 20 cents, or 4%, to close at $5.20.

Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) were meantime up 26 cents, or 4.6%, to $5.91.

Yet again, the mortgage giants’ preferreds were among the day’s biggest percentage gainers.

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