Midday Commentary: Preferreds open firm, decline again by midday; banks taking bulk of the heat

By Stephanie N. Rotondo

Phoenix, June 21 - Despite a strong open, the preferred market had "rolled over" and continued to sell off, a trader said Friday.

"Banks are taking it harder than most," the trader said, pointing to a "fear of higher rates and less business in the mortgage refinancing [area].

"People are still looking at issues that are shorter-term calls, high-coupon issues."

Another trader noted that "certain widely held issues" were selling off, as most ETFs were seeing outflows.

"The ETFs are trying to get back into balance," he said. He opined that it was those outflows and the ETF rebalancing that was causing the market's depression.

"There's a lack of natural buyers coming in," he said. "Everybody is a little bit shaky."

Still, with things having been soft for a few days, the trader did think that the current weakness would at some point present "a good buying opportunity," once investors realized the downturn had gone too far.

There also continued to be a lack of new issues in the market, though that was not unusual for a Friday. But the market's recent performance wasn't helping much either.

"Obviously, this market has a lot of people sitting on the sidelines," a trader said.

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