Preferred stocks subdued ahead of Fed announcement; Wells Fargo lists; oil shares rise

By Stephanie N. Rotondo

Phoenix, Sept. 16 – The preferred stock market continued to be on the muted side early Wednesday as “people are still focused on tomorrow’s Fed non-announcement, probably,” a trader said.

The trader was referring to the Federal Reserve’s two-day policy meeting that began Wednesday and would conclude Thursday – with a possible interest rate hike.

The trader noted a recent Jefferies report in which the investment group likened the “will they or won’t they?” drama to Y2K – that is, a much-hyped situation that ultimately turns into a non-event. Jefferies’ Sean Darby opined on CNBC earlier in the week that the central bank would look to raise rates in December instead of this month, given the recent volatility in the markets.

“The Fed is the big thing,” a market source remarked.

But even as liquidity fell short of stellar, the market did end with a firm tone.

The Wells Fargo Hybrid and Preferred Securities index ended up 6 basis points after being down 2 bps at mid-morning.

Wells Fargo & Co.’s $900 million of 6% series V class A noncumulative preferreds began trading on the New York Stock Exchange on Wednesday, as was expected.

The ticker symbol is “WFCPV.” The deal came Sept. 8.

The preferreds finished at $24.95, which was unchanged from opening levels. However, a trader had quoted the issue at $24.96 bid, $24.97 offered earlier in the session.

Among other recent deals, AmTrust Financial Services Inc.’s $125 million of 7.5% $25-par subordinated notes due 2055 were seen at $24.63 bid, while Qwest Corp.’s $400 million of 6.625% $25-par senior notes due 2055 were pegged at $24.60 bid early on, though they were seen closing at $24.87.

AmTrust came Sept. 9, and Qwest priced on Thursday.

Oil preferreds improve

Oil and gas-linked preferreds were on the rise Wednesday as new data showed a larger-than-expected drawdown of U.S. crude inventories.

The data also resulted in big gains for crude prices, with domestic crude jumping 5.52% on the day.

Goodrich Petroleum Corp.’s 9.75% series D cumulative preferreds (NYSE: GDPPD) saw a huge percentage gain, rising 12 cents, or 7.27%, to $1.77. The 10% series C cumulative preferreds (NYSE: GDPPC) ended up 3 cents, or 1.71%, at $1.78.

Dividends on both of those issues were suspended on Aug. 28.

Vanguard Natural Resources LLC’s 7.75% series C cumulative redeemable preferred units (Nasdaq: VNRCP) were another big percentage gainer, closing up 97 cents, or 5.25%, to $19.46. The 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) meantime put on 46 cents, or 2.57%, to end at $18.37.

And, Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) improved by 57 cents, or 4.31%, to $13.81.

In its latest weekly report, the U.S. Energy Information Administration said crude inventories fell 2.1 million barrels last week, 1.9 million barrels of which were taken from the Cushing, Okla.-based delivery point. Investors had been pushing oil prices up all week ahead of announcement, after Genscape forecast a 1.8 million-barrel draw from Cushing on Monday.

Analysts polled by Reuters had expected that inventories would gain 1.2 million barrels.

Still, the news wasn’t all good, as the EIA also said that gasoline and distillate stockpiles were up about 3 million barrels.

Greek bank on ‘upward swing’

National Bank of Greece SA’s $2.25 series A noncumulative preference shares (NYSE: NBGPA) have “been on an upward swing,” a market source, said and Wednesday’s session was no different.

The shares improved 57 cents, or 8.91%, to $6.97.

The source also noted that volume in the name has also been rising.

Earlier in the week, Greek banks released data that showed the European Central Bank has been curtailing its emergency funding to the nation’s struggling financial system. The move indicates that stability is returning to the country – and at a good time, as elections are slated for Sept. 20.

Fannie, Freddie busy

On Wednesday, senators Bob Corker, Mark Warner, Elizabeth Warren and David Vitter reintroduced the “Jumpstart GSE Reform Act.”

The bill – which “got yanked last year,” according to a source – would prohibit any increase in mortgage guarantee fees to be used for government spending and would also require the U.S. Treasury to hold onto its preferred stock stake in Fannie Mae and Freddie Mac. The Treasury could only sell off its holdings with congressional approval.

The legislation is aimed at providing an incentive for Congress to make housing finance reform a priority.

Earlier in the week, Warren reportedly pulled her support for a similar bill, as revised language would have allowed guarantee fees to be used to cover government spending in other areas. According to reports, Warren was concerned that any potential increase in fees would then be passed on to low-income borrowers.

And while trading in Fannie and Freddie preferreds was on the busier side, according to a source, there wasn’t much movement. The source speculated that the news had already been priced in.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were unchanged at $4.78, while Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) gained 3 cents, closing at $4.73.

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