Morning Commentary: Preferreds trend lower in sympathy with equities; Morgan Stanley quoted wide

By Stephanie N. Rotondo

Seattle, Jan. 30 – The preferred stock market started Monday’s session with a weaker tone, though not as weak as its common stock counterpart.

“Nothing is moving a ton except for equities,” one preferred stock trader said.

The Wells Fargo Hybrid and Preferred Securities index was down 13 basis points. The Dow Jones industrial average had waned 175 points by mid-morning, falling under the historic 20,000-mark that it reached last week.

Even Morgan Stanley & Co. Inc.’s $1 billion of 5.85% series K fixed-to-floating rate noncumulative preferreds – a benchmark deal priced Tuesday – was “not doing too much,” according to a trader.

He said the paper was being quoted wide at $25.05 bid, $25.30 offered.

Meanwhile, Pennsylvania Real Estate Investment Trust’s 7.2% series C cumulative redeemable perpetual preferred stock was “holding” at $24.93 bid, a trader said.

On Friday, the company said its $22.5 million over-allotment option had been fully exercised, bringing the total amount outstanding to $172.5 million. The REIT initially sold $150 million of the preferreds on Jan. 18.

Away from newer deals, GSE preferreds remained in play. The paper was also bucking the day’s downward trend, though there continued to be a lack of news to act as a catalyst.

Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up 8 cents at $8.93, as Freddie Mac’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) improved 9 cents, or 1.09%, to $8.37.

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