Morning Commentary: Preferreds firm ahead of Fed decision; KeyCorp holding steady; Saratoga eyed

By Stephanie N. Rotondo

Seattle, Dec. 13 – The preferred stock market was gaining ground early Tuesday as investors waited to see if the Federal Reserve would in fact raise interest rates.

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

The central bank begins its two-day policy meeting on Tuesday, with a statement coming Wednesday afternoon. It is widely expected that the Fed will in fact raise rates.

While the market was performing better, overall activity was on the muted side, according to a trader.

“It’s pretty quiet,” he said. “A lot of things went ex-dividend today.”

KeyCorp’s $500 million of 6.125% series E fixed-to-floating rate noncumulative perpetual preferred stock – a deal priced Dec. 5 – was holding in a $25.33 to $25.40 range, a trader reported.

A market source said the issue will begin trading on the New York Stock Exchange under the ticker symbol “KEYPI” on Thursday.

Currently, the paper is trading under a temporary symbol, “KYYPP.”

As for this week’s new deals, a trader said Saratoga Investment Corp.’s planned $55 million offering of $25-par seven-year notes would be pricing later in the day.

He noted that he had not yet seen any price talk – nor any gray markets, for that matter – but that he heard “the deal is going well.”

Ladenburg Thalmann & Co. Inc., BB&T Capital Markets, Compass Point and William Blair & Co. are running the books.

Proceeds from the offering will be used to take out a portion of the 7.5% $25-par notes due 2020 (NYSE: SAQ).

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