Preferreds firm as week begins; Pennsylvania REIT, National Retail in play; GSEs gyrate

By Stephanie N. Rotondo

Seattle, Jan. 23 – Preferred stocks were better on Monday, though a trader noted that overall activity was initially muted.

“Everyone is still trying to figure it all out,” a market source said. Investors are looking to the new Trump administration for clues as to how things like taxes and regulations will be handled, but so far, very little information has emerged. Earnings have meantime been in line with expectations, so there is little to move markets there either.

“There’s been no changes in credit spreads in anything,” the source added.

The Wells Fargo Hybrid and Preferred Securities index closed the day up 73 basis points. A source said the gains came “slow and steady” until around 2:20 p.m. ET, when the index jumped sharply.

There was, however, no real explanation for the jump, though the source added that the U.S. iShares Preferred Stock index saw “comparable activity.”

That index rose 45 bps.

The primary remained quiet as well, but there was chatter that a new energy deal could come this week.

As for last week’s new issues, Pennsylvania Real Estate Investment Trust’s $150 million offering of 7.2% series C cumulative redeemable preferreds finished at $24.96, a gain of 4 cents on the day.

The preferreds were pegged at $24.85 bid in early dealings.

“They have been trading right around that level,” a trader said.

The deal came Wednesday, upsized from $75 million and tight to the 7.375% area price talk.

The issue is trading under a temporary symbol, “PNYLP.”

Wells Fargo Securities LLC, Citigroup Global Markets Inc., Jefferies, J.P. Morgan Securities LLC and Stifel Nicolaus & Co. Inc. ran the books.

In the secondary, National Retail Properties Inc.’s 6.625% series D cumulative redeemable preferreds (NYSE: NNNPrD) were busy but unchanged at $25.27.

The 5.2% series F cumulative redeemable preferreds (NYSE: NNNPrF) improved 22 cents, or 1%, to $22.21.

On Wednesday, the Orlando, Fla.-based REIT said it was redeeming the series D issue on Feb. 23 at $25.3128472 per share.

Meanwhile, GSE-linked preferreds were on the active side in an otherwise subdued day. The issues were initially weakening after rebounding Friday from Thursday’s lows, but eventually closed the session on higher ground.

The weakness seen Thursday was due to comments made by Treasury Secretary nominee Steven Mnuchin regarding the new administration’s plans to handle housing reform. Mnuchin indicated that any plan involving a recapitalization and release from government control of the GSEs would not be accepted.

Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up 29 cents, or 3.52%, at $8.54. Freddie Mac’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) rose 19 cents, or 2.43%, to $8.00.

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