Preferred market firms up after softer start; JPMorgan in focus; new issue pipeline stalls

By Stephanie N. Rotondo

Phoenix, Feb. 11 – The preferred stock market ended up a good bit after starting the day on shaky ground, a market source said Wednesday

“There’s a lot of cash flowing into the $25-par side of the market,” the source said, part of investors’ “continuing grab for yield.”

The Wells Fargo Hybrid and Preferred Securities index closed up 23 basis points, or almost 4 cents on average for $25-par issues. The index had been flat at mid-morning.

The source also noted that trading was “definitely more liquid.”

Investors continued to show interest in JPMorgan Chase & Co.’s $1.38 billion issue of 6.125% series Y noncumulative preferreds.

The deal priced Feb. 5 via J.P. Morgan Securities LLC, coming upsized from $400 million and at the tight end of revised talk.

On Monday, the New York-based bank said it had exercised its greenshoe, increasing total issuance from $1.2 billion.

The preferreds closed the day at $24.93, up 2 cents from the previous session. The preferreds were trading at $24.95 early in the day, up 4 cents from the previous day’s close and 3 cents better than opening trades.

Over 1.8 million shares changed hands.

The preferreds are trading under the temporary symbol “JPQMP.”

A trader noted that there was “no talk of a [new] deal today.”

Another source said that if “the big banks” don’t come with anything this week, the pipeline could stay relatively muted until the Federal Reserve releases stress test results in mid-March. Investors will be watching Citigroup Inc.’s results in particular, considering that the bank nearly failed the test last year.

If the results don’t show any improvement, Michael Corbat may be forced to give up his position as chief executive officer.

But for the time being, Citigroup’s preferreds are managing rather well, with most issues trading at a sizable premium.

The 6.875% series L noncumulative preferreds (NYSE: CPL) closed up a dime at $26.33.

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