Preferreds pressured in low-volume trading amid government turmoil; recent deals active

By Stephanie N. Rotondo

Phoenix, Oct. 7 - A preferred stock trader said investors were taking a pause on Monday as they waited to see how the federal government would deal with a partial shutdown, not to mention the debt-ceiling debacle.

"It's one of the quietest days ever," he said. "Nobody wants to do anything, waiting for the government."

"I think Washington kind of has everything held up," said another market source.

The government has been partially shut down since early last week, as Congress failed to pass a budget for the upcoming year. While talks have reportedly been ongoing to get something passed, House speaker John Boehner has said he won't call for a vote on anything that includes funding for the Affordable Care Act, or Obamacare as it is frequently referred to.

Negotiations have also been in the works on the debt ceiling, which is expected to be hit by Oct. 17. But those have also proved to be unfruitful thus far.

As for the preferred market, the trader noted that securities were trading off "marginally."

The Wells Fargo Hybrid and Preferred Securities index was down 15 basis points as of midday. By the end of business, the index was off 17 basis points.

Recent deals dominate

Though it was a "light volume day," according to one source, the most actively traded names remained recently priced deals.

Citigroup Inc.'s $900 million of 7.125% series J fixed-to-floating rate noncumulative preferreds (NYSE: CPJ) - a deal that came Sept. 12 and listed on the New York Stock Exchange on Sept. 30 - were the dominating securities of the session, as the paper fell 2 cents to $25.47.

The Allstate Corp.'s 6.75% series C fixed-rate noncumulative perpetual preferreds (NYSE: ALLPC), which came Sept. 23 and listed on the NYSE on Friday, were also busy and down a deuce at par.

Morgan Stanley Co. Inc.'s $750 million of 7.125% series E fixed-to-floating rate noncumulative preferreds were meantime off 3 cents at $25.45.

But CHS Inc.'s $250 million of 7.875% series 1 class B cumulative redeemable preferred stock bucked the downward trend, rising 56 cents, or 2.03%, to end at $28.10.

The deal came Sept. 20.

Also trading busily was Wells Fargo & Co.'s $1.5 billion of 5.85% series Q class A noncumulative preferred stock. That deal did not price recently - it came July 15 - but its massive size has made it a typically liquid name in the preferred space.

The shares (NYSE: WFCPQ) moved up 3 cents to $24.40.

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