Preferred stocks hold on to gains as Fed votes to increase rates; Validus active, better

By Stephanie N. Rotondo

Seattle, June 14 – The preferred stock market continued to gain ground on Wednesday, both ahead of and after the Federal Reserve’s latest policy announcement.

The Wells Fargo Hybrid and Preferred Securities index was up 23 basis points. The U.S. iShares Preferred Stock ETF, while still better on the day, ended up only 9 bps. It was up 22 bps at mid-morning.

The Federal Reserve’s Federal Open Market Committee kicked off its quarterly meeting on Tuesday. Come Wednesday afternoon, the FOMC said that, based on relatively positive recent economic data, interest rates would increase to 1% to 1.25% from 0.75% to 1% previously.

The increase was the second hike in six months. The committee also indicated that one more increase this year may be warranted.

Like the previous increase, only one member of the FOMC voted against the raise.

In addition to its rate policy announcement, the FOMC also unveiled its plan to unwind its $4.5 trillion balance sheet, which is made up of Treasuries and agency securities.

One market source noted that “the selling timetable was accelerated from expectations.”

And while a trader noted that the Fed’s meeting was keeping investors preoccupied, recently priced deals continued to be on the more active side.

Validus Holdings Ltd.’s $250 million of 5.8% series B noncumulative preference shares, for instance, were quite busy, with over 2.9 million shares being exchanged.

The issue closed at $25.27, up 22 cents.

One trader quoted the issue in a $25.18 to $25.22 context, though another source called the paper up a nickel at $25.10.

The deal came on Monday, upsized from $150 million and tight to the 5.875% price talk. It freed to trade on Tuesday and was assigned a temporary ticker symbol, “VRRHP.”

Meanwhile, NGL Energy Partners LP’s $185 million of 9% class B fixed-to-floating rate cumulative redeemable preferreds gyrated throughout the session, eventually ending 5 cents weaker at $24.81.

Almost 339,000 of the preferreds were traded during the day.

That issue priced June 6 and is trading under a temporary symbol, “NGGLP.”

And, Maiden Holdings Ltd.’s $150 million of 6.7% series D noncumulative preference shares pushed up 18 cents to $25.24, on nearly 631,000 shares traded.

The deal came on Thursday, upsized from $100 million and tight to the 6.75% price talk. It is trading under a temporary symbol, “MDNHF.”

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.