Preferred stocks ‘noncommittal’ ahead of bank earnings; Wells Fargo firm; GSEs remain active

By Stephanie N. Rotondo

Seattle, Jan. 12 – The preferred stock market was giving back some of its midweek gains in early Thursday trading but eventually finished flat for the day.

“The market was very noncommittal today,” a market source said. But he added that “nothing was driving” the market as there was “nothing to focus on.”

The Wells Fargo Hybrid and Preferred Securities Index finished unchanged after being off 9 basis points at mid-morning. By comparison, the iShares U.S. Preferred Index declined 21 bps.

On Wednesday, both indexes ended firm, up 62 bps and 49 bps, respectively.

Volume was also on the lighter side once again, as the market pondered what bank earnings would bring come Friday.

Wells Fargo & Co.’s preferreds were mixed in early dealings, but finished with a firm tone.

Wells will kick off bank earnings season on Friday, along with J.P. Morgan Chase & Co. and Bank of America Corp.

Wells’ 5.5% series X class A noncumulative preferreds (NYSE: WFCPX) ticked up 8 cents to $24.12. Meanwhile, its 5.7% series W class A noncumulative preferreds (NYSE: WFCPW) improved 7 cents to $24.86.

Away from financials, Entergy Mississippi Inc.’s 4.9% $25-par first mortgage bonds due 2066 were busy and better.

The notes (NYSE: EMP) rose 14 cents to close at $22.78.

eBay Inc.’s 6% $25-par notes due 2056 (Nasdaq: EBAYL) were also on the active side, closing unchanged at $25.61.

The busiest securities of the day, however, were those of the GSEs, yet again.

A source said the activity was the “status quo.

“Ben Carson was at his confirmation hearing [as head of the housing department],” the source said. “Housing was discussed, but nothing concrete.”

Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) declined 14 cents, or 1.73%, to $7.96. Freddie Mac’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) slid 13 cents, or 1.7%, to $7.50.

Medley on tap

Medley LLC’s offering of $25-par notes due Jan. 30, 2024 officially launched on Thursday, though the deal had not priced as of press time.

The deal was announced on Monday, when the company registered $28.75 million of the notes, covering a $25 million offering and a $3.75 million greenshoe.

FBR Capital Markets, Incapital, BB&T Capital Markets, Compass Point, Ladenburg Thalmann & Co. Inc., William Blair and JonesTrading are the joint bookrunners.

Interest is payable on a quarterly basis. The notes become redeemable on Jan. 30, 2020 at par plus accrued interest.

The notes will be listed on the New York Stock Exchange.

Proceeds will be used to repay a portion of outstanding amounts under a senior secured term loan facility with Credit Suisse AG, Cayman Islands Branch.

Medley is a New York-based externally managed, non-diversified closed-end management investment company.

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