Preferred stocks turn positive; primary calendar thin ahead of expected bank earnings

By Stephanie N. Rotondo

Seattle, April 6 – The preferred stock market continued to see choppy trading on Thursday, eventually ending with a firm tone.

The Wells Fargo Hybrid and Preferred Securities index rose 41 basis points during the session. The index was down 6 bps at mid-morning.

The U.S. iShares Preferred Stock ETF was up 39 bps.

One market source noted that Treasuries and equities were “roughly flat.”

“[Preferreds] maybe outperformed a touch, but nothing dramatic,” he said.

The source also pointed out that volume was “really light, with one or two exceptions.”

Furthermore, with bank earnings on the horizon – J.P. Morgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and PNC Financial Services Group Inc. will kick things off on April 13 – the market is in a kind of “quiet period.”

The primary market, for instance, continued to be muted, despite chatter earlier in the week that the calendar would build up. One sellside source said the buzz now was that “there might not be anything until after Easter.”

Easter is April 16, meaning the new issue market could remain nearly silent for another week or more.

Another source noted that banks’ earnings season was playing a role in the lack of new issues.

“Anyone who is going to issue in the next month doesn’t want to do anything ahead of that because of any potential problems” that might arise from said earnings.

Uncertainty about potential changes in banking regulations is also playing a role in whether or not banks intend to issue, the source noted.

And those uncertainties were only flamed on Wednesday when Gary Cohn, a White House economic advisor and former Goldman Sachs banker, told lawmakers in a private meeting that he was interested in renewing the Glass-Steagall Act in some way.

The law – which was repealed in 1999 – separated banks into consumer-lending businesses and investment firms.

As for recently priced issues, TICC Capital Corp. brought the current week’s only deal thus far late Tuesday, selling $57.5 million of 6.5% $25-par notes due 2024.

The deal came upsized from $50 million and in line with price talk.

In Thursday trading, a market source said the paper closed at $25.15.

Earlier in the session, a trader pegged the paper at $24.75.

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

Among other recent deals, Tsakos Energy Navigation Ltd.’s $115 million of 9.25% series E fixed-to-floating rate cumulative redeemable preferred stock closed up 8 cents at $25.09.

At mid-morning, the preferreds were seen at $25.03 bid, though with no offers, according to a trader.

The company priced the $100 million deal on March 29, announcing the exercise of the $15 million greenshoe on Monday.

Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC, UBS Securities LLC, Citigroup Global Markets Inc. and Stifel Nicolaus & Co. Inc. were the bookrunners.

Meanwhile, Global Indemnity Ltd.’s 7.875% $25-par subordinated notes due 2047 were trading around $24.80, a trader said.

That issue came March 16, with $120 million of the notes being sold. On March 30, $10 million of an $18 million over-allotment option was exercised, bringing the total amount outstanding to $130 million.

Morgan Stanley, UBS and RBC Capital Markets led the deal.

Among listed issues, U.S. Bancorp’s 6% series G fixed-to-floating rate noncumulative perpetual preferreds (NYSE: USBPrN) were dominating the day, with over 2.2 million preferreds trading.

The paper waned 3 cents to $24.97.

The issue is being called on April 17.

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