Morning Commentary: Preferred trading muted after Fed decision; KeyCorp improves

By Colin Hanner

Chicago, Dec. 15 – Preferred stocks were winding down off the Federal Reserve’s decision to raise interest rates, though some new issues were trading mid-morning.

A trader said there was lack of activity in the morning session, as preferred stock “already sold off into this announcement,” that being the interest rate hike from Wednesday.

The Wells Fargo Hybrid and Preferred Securities index was down 28 basis points at mid-morning, and the iShares U.S. Preferred Stock ETF was trading down 20 bps.

In new issues, KeyCorp’s $500 million of 6.125% series E fixed-to-floating rate noncumulative perpetual preferred stock listed on the New York Stock Exchange on Thursday under the ticker symbol “KEYPI.”

A trader said the preferreds were trading around a $25.35 to $25.37 range.

Saratoga Investment Corp.’s $65 million of 6.75% $25-par notes due 2023 – a deal priced Wednesday –were trading around $24.75, a trader said.

Though one trader called activity in the preferred space “boring,” the secondary market was trending lower.

Entergy Arkansas’ 4.875% $25-par first mortgage bonds (NYSE: EAI) were off 9 cents at $20.88.

Wells Fargo & Co.’s 8% series J noncumulative preferred stock (NYSE: WFCPJ) was down 4 cents to $26.24, and HSBC Holdings’ 8% exchangeable perpetual subordinated securities (NYSE: HSEB) were down 1 cent to $25.71.

In market news, General American Investors announced it could buy back around 10% of its GAM preferred B stock (NYSE: GAMPB) in the open market, if it’s below $25.00, a trader said.

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