Hopes of a debt-ceiling deal boost preferreds; Citigroup, Morgan Stanley preferreds rise

By Stephanie N. Rotondo

Phoenix, Oct. 10 - Preferred stocks were seeing "a little bit of a bounce with the equity market," a trader said Thursday.

The move up came on hopes the government would work out a debt-ceiling deal before the Oct. 17 deadline. However, a budget deal is yet to come, meaning the government will remained partially shuttered.

Still, the hopes had helped the market regain the ground it lost Wednesday and then a touch more.

"The market didn't really respond to the Republicans' olive branch," one market source said, referring to reports that House Speaker John Boehner planned to introduce a plan that would raise the debt limit for six weeks without any conditions.

The Wells Fargo Hybrid and Preferred Securities index closed up 25 basis points. The index had finished down by 20 bps on Wednesday.

Citigroup Inc.'s 7.125% series J fixed-to-floating-rate noncumulative preferreds (NYSE: CPJ) remained very busy, with more than 500,000 shares trading by lunchtime. By the end of the day, more than 1.6 million shares had been exchanged.

The shares were up 4 cents at $25.62. Earlier in the session, the preferreds had been on the down side, but they regained ground as the day wore on.

Behind that issue was Morgan Stanley's 7.125% series E fixed-to-floating-rate noncumulative preferreds (NYSE: MSPE), another issue that has been taking focus since pricing in mid-September.

That paper put on a dime to close at $25.35.

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