Morning Commentary: Wells Fargo’s new deal set to free; Goldman, JPMorgan report earnings

By Stephanie N. Rotondo

Phoenix, July 15 – Preferred stocks were soft ahead of Federal Reserve chairman Janet Yellen’s testimony before Congress on Tuesday.

The Wells Fargo Hybrid and Preferred Securities index was down 6 basis points.

It was expected that congressional leaders would be most interested in when the central bank plans to raise interest rates, as well as how it planned to ease its monetary policy – and when.

At mid-morning, a trader said Wells Fargo & Co.’s new $700 million issue of 6% series T class A noncumulative perpetual preferreds – a deal that priced Monday – was expected to free by 10:30 a.m. ET.

“It should start drifting up once it frees,” he said, already seeing paper climbing up to around $24.85.

Wells Fargo Securities LLC led the deal.

The trader remarked that he had not heard of any other new deals coming to market, though he noted that Citigroup Inc. said in its earnings announcement on Monday that the bank intended to continue issuing preferred stock.

The Goldman Sachs Group Inc. and JPMorgan Chase & Co. came out with their own earnings on Tuesday. Both banks had better-than-expected fixed-income revenues, which helped them report profits that beat estimates.

Still, both preferred structures were mixed overall, and in the case of JPMorgan, liquidity was lacking.

But Goldman’s 5.5% series J fixed-to-floating rate noncumulative preferreds (NYSE: GSPJ) were quite busy early in the session, with well over 400,000 shares trading.

The preferreds were up 6 cents at mid-morning, trading at $24.53.

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