Preferred stock sell-off ends as market closes higher; Citi, HSBC paper actively traded

By Andrea Heisinger

New York, Aug. 1 - The week got off to a sleepy start in the preferred stock market on Monday as buyside and sellside sources said all eyes were on an outcome from the debt ceiling votes happening in the Senate.

"It's very quiet," one source said. "Everyone's just watching and waiting."

Later, he added that the market is "waiting for direction" and that they're sitting on their hands.

"Mondays we usually see more action as everyone's digesting what happened over the weekend," the market source said.

After the debt ceiling vote made it through the House on Sunday night there was optimism to open the markets Monday morning following rallies in Asia and Europe overnight.

The market closed up for the day, a source said, adding that it wasn't an all-time high but "pretty high."

The preferred stock market ended up 91 basis points - about 1% - and most paper was up a quarter.

"It was an up day, and there haven't been too many of those recently," he said. "There's a lot of green."

The market started off positive, dropped back, and then started moving back up in the last half hour before the close, the source said.

Sell-off ends

A sell-off that brought the tone of the preferred stock market down on Thursday and Friday of the previous week ended on Monday, a source said, with that tone being replaced by a standstill.

"We're not getting any calls - nothing," the trader said. "Stuff sold hard on Thursday and Friday."

There wasn't much trading in any recent issues, he said, later adding that some paper was "bouncing around" but that there wasn't any meaningful shift in how they were performing.

Citi most active

Traders reported low volume in preferred stock as the market as a whole was quiet.

The most active paper was a Citigroup Inc. preferred series N, a trader said.

There were 1.3 million shares of the paper changing hands, and it was up 10 cents on the day to $27.17.

"Volume is still light," the trader said. "There was a big drop between that and the next most active."

The next most active issuer happened to be Deutsche Bank Contingent Capital Trust V, which saw 307,000 shares of its 8.05% trust preferred securities trade. The paper was up 2 cents to $25.89.

Preferred stock, series B, from HSBC was also active, a trader said. There were 98,000 shares of the paper traded, closing up 19 cents to end at $27.49.

The bank reported second-quarter earnings on Monday of $9.2 million - up 36% from the same period a year ago. HSBC also announced it would cut 30,000 jobs in a cost-saving measure.

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