Morning Commentary: Preferred stocks remain firm as China fears subside; calendar expected to build

By Stephanie N. Rotondo

Phoenix, July 17 – After a huge run up on Thursday, preferred stocks were continuing to gain ground, albeit in a more modest fashion.

The Wells Fargo Hybrid and Preferred Securities index was up 4 basis points to 5 bps at mid-morning. The index closed Thursday up over 40 bps.

A trader remarked that “the biggest movers are up a dime,” adding that a slight gain in the long bond was helping.

A potential – and, if speculation can be believed, likely – interest rate increase later this year remained a hot topic, the trader said. Given the likelihood of the hike, as well as a stabilization of the markets, the trader said he “wouldn’t be surprised if we see a deal or two next week,” as issuers rush in to take advantage of the lower rates.

As for the stabilization of the market, that feeling was furthered as China established “plunge protection” for its equity markets, a mechanism that would prevent major sell-offs, such as the one the country experienced in recent weeks.

“That should help ease any fear people have about the Chinese markets,” a trader said.

Of the day’s early dealings, State Street Corp.’s 5.9% series D fixed-to-floating rate noncumulative preferreds (NYSE: STTPD) were trading actively and higher, rising 3 cents to $25.90.

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