Preferreds strong, but volume lackluster; BreitBurn units 'doing OK'; RBS preferreds mixed

By Stephanie N. Rotondo

Phoenix, May 20 - Preferred stocks continued to post modest gains in early Tuesday trading, but a trader lamented the lack of any real activity.

"We have had such strong yield compression, and I think people don't want to jump to a lower credit rating just for a little more yield," he said as a way of explaining the subdued environment. However, he also noted that the upcoming three-day Memorial Day holiday could be a factor.

The Wells Fargo Hybrid and Preferred Securities index was up 4 basis points at mid-morning. At the close, the index had gained 13 bps.

Of the few recently priced deals that have yet to list on any exchange, BreitBurn Energy Partners LP's 8.25% series A cumulative redeemable preferred units were "doing OK," a trader said, seeing the units at $24.95.

The $175 million deal priced May 14. On Monday, the Los Angeles-based oil and gas partnership said its $25 million over-allotment option had been exercised in full.

RBS shares end mixed

Royal Bank of Scotland Group plc's preferred stock was mostly firm on the day, though the most liquid issues were unchanged to weaker.

The 6.35% series N noncumulative dollar preference shares (NYSE: RBSPN) held in at $23.90. But the 6.4% series M noncumulative dollar preference shares (NYSE: RBSPM) dipped a penny to $24.07 and the 7.4% series G noncumulative dollar preference shares (NYSE: RBSPG) lost 3 cents to end at $24.04.

The 6.6% series S noncumulative dollar preference shares (NYSE: RBSPS) were stronger, however, rising 8 cents to $24.61.

Overall, RBS preferreds saw modest volume as the market digests news the company is looking to wind down its rates prime broking and over-the-counter clearing businesses. The decision to end those units was based on lower profitability and is yet another move the Edinburgh, Scotland-based bank has undertaken to move away from investment banking.

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