Preferred stocks hold early gains; bank earnings on tap; energy-linked preferreds do well

By Stephanie N. Rotondo

Seattle, April 11 – Preferred stocks were “slightly green with the equity tape” in early Monday trading, according to one trader. And while the equity arena eventually gave up its gains, preferreds remained strong throughout the session.

The Wells Fargo Hybrid and Preferred Securities index closed 27 basis points higher. The index was up 21 bps at mid-morning.

But even as the market had a firm tone, the primary space remained quiet.

“I’m not hearing of anything new,” a trader said. “I was surprised. I figured we would see something come today or at least hear chatter of something for tomorrow.”

The trader noted that banks were likely waiting until after earnings to bring any new deal – JPMorgan Chase & Co. will kick-off the season with its results on Wednesday – but he thought other sectors might want to get in ahead of that.

“It’s not a bad time to come,” he said. For areas like real estate investment trusts, there are currently “attractive valuations” given the recent rise in the market. Rates are also still low.

“I would think it would make sense to come before bank earnings, because after, they might get crowded out of the market,” he said.

Crude pushes energy higher

A nearly 2% gain in domestic crude oil prices was moving up the energy sector on Monday.

Oil pushed up to more than $40 a barrel on Monday, helped in large part by comments from Russia that its production in 2017 would likely remain flat year over year. However, several banks were expressing doubt that any production freeze deal coming out of Doha next week – when a group of OPEC and non-OPEC producers meet to discuss the proposal – would do much to help rebalance the commodity’s price.

Legacy Reserves LP’s 8% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) were up 43 cents, or 15.14%, at $3.50. The 8% series A fixed-to-floating rate cumulative redeemable preferred units (Nasdaq: LGCYP) were up 48 cents, or 17.39%, to $3.24.

Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) were meantime bucking the upward trend, falling $1.16, or 20.35%, to $4.54. The loss made the issue the biggest percentage loser of the day.

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