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Midday Commentary: Preferred market quiet but firm; Wells Fargo's new $1,000-par doing well
By Stephanie N. Rotondo
Phoenix, April 15 - Preferred stocks were muted in early Tuesday trading, due in part to it being Passover.
But the subdued activity was expected to last throughout the week, as markets are also closed Friday for Good Friday.
"I think it's going to be a very quiet week from here on out," a trader said.
He also speculated that as there were no new issues announced Tuesday, the calendar would probably stay silent until next week, when the pipeline is expected to start flowing.
Though the market was not overly active, the Wells Fargo Hybrid and Preferred Securities index was up 8 basis points as of mid-morning. The gains came even as Federal Reserve chairman Janet Yellen said that the central bank was considering imposing additional short-term wholesale funding rules on banks.
Among recent deals, Wells Fargo & Co.'s $2 billion of 5.9% $1,000-par series S class A fixed-to-floating rate noncumulative perpetual preferreds were "moving up nicely," a trader said, seeing the issue "locked" at par 7/8.
The preferreds had yet to free, he said.
The dividend will be fixed until June 15, 2024, at which point it will begin floating at Libor plus 311 bps.
Wells Fargo Securities LLC led the deal.
Also, Legacy Reserves LP's $50 million of 8% series A fixed-to-floating rate cumulative redeemable preferred units - a deal that came Thursday - were seen at $24.80 bid.
Stifel Nicolaus & Co. Inc., Barclays and MLV & Co. LLC were the joint bookrunning managers.
Dividends will be payable on the 15th day of each month. The dividend will be fixed through April 15, 2024, at which time it will begin floating at Libor plus 524 bps.
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