Preferreds open firm, sink by end of business; foreign banks dominate trading, end mixed

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."

After the close, a market source said that there was "a bit of a rebound" early in the day, though the market eventually turned downward, ending with a slightly negative tone.

Still, with things having been soft for a few days, a 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.

Banks mixed with market

Foreign banks were dominating trading during Friday's session.

HSBC Holdings plc's 8% exchangeable subordinated perpetual capital securities (NYSE: HCSPB) dropped 22 cents to $26.73.

But ING Groep NV's 7.375% perpetual hybrid capital securities (NYSE: IDG) traded up 3 cents to $25.31, while Royal Bank of Scotland Group plc's 6.08% noncumulative guaranteed trust preferreds (NYSE: RBSPG) earned 17 cents, closing at $21.06.

Among U.S.-based financials, Ally Financial Inc.'s 8.5% series A fixed-to-floating rate perpetual preferreds (NYSE: ALLYPB) regained some of the ground it had lost recently, rising 33 cents to $26.17.

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