Morning Commentary: Preferreds weaken with oil, equities; eBay dips; W.R. Berkley not yet free

By Stephanie N. Rotondo

Seattle, Feb. 24 – The preferred stock market was waning in midweek trading, though there was not necessarily any “rhyme or reason to it,” a trader said.

“There is just a strong disconnect,” the trader commented.

Still, with oil prices again on the decline such weakness seemed to be playing at least a small role in the day’s losses.

“Oil is off a buck, and that seems to wreck havoc on the banks,” a trader said. “People don’t think the banks are telling the truth about their exposure” to the struggling sector.

The Wells Fargo Hybrid and Preferred Securities index was down 41 basis points at mid-morning.

The day’s weakness was meantime weighing on recently priced deals, such as W.R. Berkley Corp.’s $100 million of 5.9% $25-par subordinated debentures due 2056.

A trader saw the issue around $24.60 in early trading, adding that the paper had not yet freed to trade.

The new issue priced on Tuesday, coming downsized from $150 million and in line with price talk.

eBay Inc.’s $750 million offering of 6% $25-par notes due Feb. 1, 2056 were then pegged at $24.78 bid, $24.82 offered.

That issue came Monday and freed to trade on Tuesday.

BofA Merrill Lynch, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Wells Fargo Securities LLC were the bookrunners on both deals.

Looking ahead, “we may see some more deals,” a trader said. While he had not yet heard of any specific deals in the works, he said that it “seems like these last couple were received very well.”

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