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Morning Commentary: Preferreds firm as rate increase seen moving out; UMH price talk revealed
By Stephanie N. Rotondo
Phoenix, Oct. 6 – Preferred stocks were rising again in early Tuesday trading.
The Wells Fargo Hybrid and Preferred Securities index was up 6 basis points at mid-morning.
Chatter continued that the Federal Reserve would push out its interest rate increase, though some have even begun to speculate that another round of quantitative easing may be in order. In either scenario, Morgan Stanley analyst Matthew Hornbach said the strategy would be the same: “get long the belly of the yield curve.”
Hornbach made those comments in a U.S. Governments Strategy Brief released on Tuesday.
A trader remarked that should those events prove true, “it could help our market.”
UMH Properties Inc. announced a $50 million offering of series B cumulative redeemable preferreds late Monday. Come Tuesday, price talk on the deal emerged in a 7.375% to 7.5% context.
“Good luck with that,” a trader quipped.
The trader said he hadn’t seen markets for the paper, though he added that the company’s existing 8.25% series A cumulative redeemable preferreds become callable in 2016. At current prices, he said that issue has a yield of 8.14%, with a yield to call around 5%.
The series A preferreds (NYSE: UMHPA) were slightly weaker on the heels of the new issue, slipping 6 cents to $25.62.
Meanwhile, the Southern Co.’s $875 million of 6.25% $25-par series 2015A junior subordinated notes due 2075 – a deal that came Thursday – were “moving up nicely,” according to a trader. That trader pegged the notes at $24.92 bid, $24.95 offered.
TravelCenters of America LLC’s $100 million of 8% $25-par senior notes due 2030 – a deal priced Wednesday – were also improving, rising to a $24.70 to $24.75 context.
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