Morning Commentary: Preferreds inch higher as Yellen makes case for rate hike; recent deals firm

By Stephanie N. Rotondo

Seattle, Aug. 26 – The preferred stock market was trending modestly higher early Friday, as Federal Reserve chairman Janet Yellen indicated that another interest rate hike was appropriate.

The Wells Fargo Hybrid and Preferred Securities index was up 4 basis points at mid-morning.

Recently priced issues were also inching upward, though liquidity was thin.

Qwest Corp.’s 6.5% $25-par senior notes due 2056 (NYSE: CTBB) remained more active than not, rising a nickel to $25.64 in early trading. Legg Mason Global Asset Management’s $500 million of 5.45% $25-par junior subordinated notes due 2056 (NYSE: LMHB) were meantime steady at $25.01.

Qwest priced Aug. 11. Legg Mason came Aug. 3.

Yellen, speaking during a three-day meeting of central bankers – both foreign and domestic – in Jackson Hole, Wyo., said that employment and “price stability” were nearing the levels the Fed wanted to see, thus making a case for another rate increase this year.

“In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the Federal Funds rate has strengthened in recent months,” Yellen said.

However, she did not indicate when such an increase might occur. The Fed has policy meetings scheduled in September, November and December.

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