Morning Commentary: Preferred stock market rises ahead of Fed decision; New York Community firms

By Stephanie N. Rotondo

Seattle, March 15 – Preferred stocks were firm ahead of the Federal Reserve’s interest rate announcement on Wednesday.

The Wells Fargo Hybrid and Preferred Securities index was up 9 basis points at mid-morning. The U.S. iShares Preferred Stock index was up 34 bps.

Still, trading volume continued to be muted, according to a trader.

“I don’t think anything [will happen] until the Fed,” he said.

The Fed’s Federal Open Market Committee began its two-day policy meeting on Tuesday. The FOMC is expected to announce whether or not it will raise interest rates in the afternoon.

It is widely believed that rates will in fact go up, rising to 0.75% to 1%.

“There was word of a possible new issue,” a trader said. “But maybe [it’s coming] Thursday or possibly next week.”

As for recent deals, New York Community Bancorp Inc.’s $500 million of 6.375% series A fixed-to-floating rate noncumulative preferreds – a deal priced Friday – continued to be more active than most other securities. A trader said the paper was “moving up,” trading in a $25.50 to $25.60 range.

Another source called the issue up 13 cents at $25.67.

Other recent issues were not as busy, however.

Two Harbors Investment Corp.’s $125 million of 8.125% series A fixed-to-floating rate cumulative redeemable preferreds were “hanging right around” $24.85, a trader said.

A second market source pegged the preferreds at $24.80, down a nickel.

The deal came March 7.

And, Spark Energy Inc.’s $35 million of 8.75% series A fixed-to-floating rate cumulative redeemable preferreds had a nice pop in early dealings, though liquidity was on the thin side.

The preferreds added $1.19, or 4.8%, to trade at $26.00.

That issue came March 8.

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