Market inches higher, reverses course, ends soft; Morgan Stanley, Fifth Third to list soon

By Stephanie N. Rotondo

Phoenix, Dec. 10 - Preferred stocks started Tuesday's session with a firm tone but weakened toward the close.

The Wells Fargo Hybrid and Preferred Securities index was up 12 basis points shortly before noon ET. But like Monday trading, the index came off of its early highs to close down 2 bps.

One trader said he had still not heard any talk of new deals.

Allstate Corp. said late Monday that it had priced more than $115 million of 6.625% series D noncumulative perpetual preferred stock via Incapital LLC's "Incapital Leopards" program, a program aimed at giving retail investors more access to the preferred space.

Allstate also said it was continuing to sell shares in the next few weeks. But one market source was skeptical.

"In [Goldman Sachs' 2014 credit outlook report released Nov. 26], it said Allstate planned to issue $1.5 billion of preferred stock over the next several months," the source said. "So $115 million is not very much. Maybe they will bring a more institutionally oriented fixed-to-float in the coming months, but I don't see them raising $1.5 billion in this Leopard format."

A market source said he believed the issue was trading around $24.90, though "it's hard to tell because they reopened it right away."

Last week's new issues remained active. Morgan Stanley & Co. Inc.'s $850 million of 6.875% series F fixed-to-floating rate noncumulative preferreds were "just below par," according to a trader, while Fifth Third Bancorp's $450 million of 6.625% series I fixed-to-floating rate noncumulative preferreds were "right at par."

After the bell, a source placed the Morgan Stanley paper at $24.95, which he said was off 9.5 cents. The issue was the most actively traded among paying securities, with about 2.9 million shares being exchanged.

Morgan Stanley priced on Wednesday, and Fifth Third came Dec. 3.

Both issues already have reporting symbols, so the deals could soon be hitting the New York Stock Exchange.

"I would assume they would list Friday or the beginning of next week," a trader said.

In the secondary market, Ally Financial Inc.'s 8.125% series 2 fixed-to-floating rate trust preferreds (NYSE: ALLYPA) continued to be active and weaker, falling 4 cents in Tuesday trading to close at $26.71.

PNC Financial Services Group Inc.'s 5.375% series Q noncumulative preferreds (NYSE: PNCPQ) were also quite busy, as over 1 million shares changed hands. The issue finished the session up 9 cents at $20.02.

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