Preferred stock market subdued at week’s end; KeyCorp firms; Fannie, Freddie trade lower

By Stephanie N. Rotondo

Seattle, Dec. 9 – The preferred stock market was muted in Friday trading.

“I think it’s going to be a sleepy day,” one trader opined at mid-morning.

“Volume was very light away from GSE preferreds,” said another market source.

Despite the limited liquidity, the market initially tried to tick up, but retreated by day’s end.

The Wells Fargo Hybrid and Preferred Securities index dropped 11 basis points for the day. The index was up that much at mid-morning.

KeyCorp’s $500 million of 6.125% series E fixed-to-floating rate noncumulative preferreds were seen at $25.40, up 24 cents. Volume, however, was less than 500,000 shares.

The deal came Monday, upsized from $250 million and tight to the 6.25% area price talk. The issue freed from the syndicate on Tuesday and is trading under a temporary symbol, “KYYPP.”

There was, however, continued “chatter that we’ll see a couple [new deals] before the end of the year,” a trader said.

“But I think they will probably be small-ish,” the trader speculated.

As for the GSE-linked paper, that was a touch weaker on the day.

Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) declined 11 cents, or 1.3%, to $8.38.

Trading in that issue ticked up above the 1 million-mark again, after trading under that level for the last few days.

Freddie Mac’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) were meantime a penny lower at $7.89.

Less than 850,000 of those shares were exchanged.

Wells trades up

Wells Fargo & Co.’s preferreds were mostly better on the day, despite news the company could be slapped with a regulatory downgrade from the Office of the Comptroller of the Currency.

One market source opined that the news wasn’t all that relevant to the preferreds.

“I don’t think it is a big credit issue,” the source said. “I don’t think a lot of people look at that in deciding to do business with them.”

If anything, he said, it could be negative for the common stock.

The 5.5% class A series X noncumulative preferreds (NYSE: WFCPX) slipped 3 cents to $22.74. However, the 6% class A series V noncumulative preferreds (NYSE: WFCPV) rose 2 cents to $24.97, while the 5.2% class A series N noncumulative preferreds (NYSE: WFCPN) improved 16 cents to $23.35.

The 5.85% class A series Q noncumulative preferreds (NYSE: WFCPQ) were also better, adding 4 cents to close at $24.82.

The San Francisco-based bank was expecting to receive its most recent OCC grade on Thursday. But the agency delayed the community-lending score, for unknown reasons.

If the company is downgraded, it will likely be because of the sales-tactics scandal that was uncovered in September.

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