Morning Commentary: ‘Quiet’ activity in volume-light preferred market; talk of new REIT deal

By Colin Hanner

Chicago, Jan. 17 – Trading was quiet in the preferred market mid-morning Tuesday after a long Martin Luther King Jr. holiday weekend, with one trader characterizing activity as extremely subdued.

It’s really quiet right now,” the trader said. “Heard there might be a non-rated, high-yield REIT [real estate investment trust] coming out today, but I haven’t heard a name yet.”

Although “everyone thought” more new issues were going to come to the market in the past few sessions, a trader said, Medley LLC’s $30 million offering of 7.25% $25-par notes due Jan. 30, 2024 is the only deal to come out recently, but “everyone knew about that,” the trader added.

Volume was light and mostly positive in the secondary market early, with the Wells Fargo Hybrid and Preferred Securities index up 11 basis points and the iShares U.S. Preferred index up 7 bps.

Freddie Mac’s 8.375% fixed-to-floating rate noncumulative perpetual preferred stock (NYSE: FMCKJ) was up 2 cents to $7.62.

HSBC Holdings plc’s 8% exchangeable perpetual subordinated capital securities (NYSE: HSEB) were up 8 cents to $26.02.

And Legg Mason, Inc.’s 5.45% junior subordinated notes (NYSE: LMHB) were up 13 cents to $23.01.

One of the morning’s worst performers was Hovnanian Enterprises, Inc.’s 7.625% series A depository shares preferreds (NYSE: HOVPrN), which were down 20 cents to $7.60 on more than three times the volume typically seen for the issue.

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