Midday Commentary: Preferreds continue to ease; Digital Realty edges upward, not yet free to trade

By Stephanie N. Rotondo

Phoenix, March 20 - Preferred stocks continued to decline Thursday, following a slight sell-off Wednesday after Janet Yellen held her first press conference as chairman of the Federal Reserve.

In her comments, Yellen said the Fed was no longer going to base its decision to alter interest rates solely on unemployment data.

"The Fed will probably keep an eye on housing instead of jobs now," one trader speculated, giving a nod to new housing figures which showed that existing home sales had fallen to their lowest level in 19 months.

The Wells Fargo Hybrid and Preferred Securities Index was down 21 basis points at mid-morning.

Digital Realty Trust Inc. priced a $300 million issue of 7.375% series H cumulative redeemable preferreds late Wednesday and on Thursday a trader was seeing gray market levels for the paper in a $24.80 to $24.83 context.

The shares were in a $24.75 to $24.80 ZIP code going out in the gray market on Wednesday.

The new deal had not yet freed to trade, he said.

BofA Merrill Lynch, Morgan Stanley & Co. Inc. and Wells Fargo Securities LLC were the joint bookrunners.

The San Francisco-based real estate investment trust intends to contribute proceeds to its operating partnership which will use the funds to repay borrowings under a global revolving credit facility, to acquire additional properties, for development opportunities and/or for general corporate purposes, including the potential repurchase or redemption of outstanding debt or preferred securities.

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