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Morning Commentary: BofA, Citigroup deals join new issue pipeline; Morgan Stanley earnings beat
By Stephanie N. Rotondo
Seattle, April 18 – The preferred stock primary market started to pick up on Monday as Bank of America Corp. and Citigroup Inc. both announced offerings.
For its part, Bank of America said it was selling series EE noncumulative perpetual preferreds via BofA Merrill Lynch.
Price talk is around 6.125%, according to a trader, though he remarked that it would probably come in around 6%, “because of the demand on it.”
He saw a $24.80 bid, $24.87 offered quote in the gray market at mid-morning.
In response to the new issue, the existing 6.2% series CC noncumulative preferreds (NYSE: BACPC) were trading down 32.5 cents, or 1.25%, at $25.595.
Citigroup meantime said it was planning to sell $1,000-par series T fixed-to-floating rate noncumulative preferreds.
A trader put price talk at 6.5%.
“They will ratchet that back too,” he said. Given that the 5.8% $1,000-par series N fixed-to-floating rate noncumulative preferreds were trading in a 96 to 97 context, “that’s a good indication that the Street expects them to tighten this deal.”
Citigroup Global Markets Inc. is running the deal.
Away from new issues, Morgan Stanley & Co. Inc. announced its first-quarter results on Monday. While profit declined over 50% year over year, the earnings still beat expectations.
However, the 6.45% capital securities (NYSE: MSK) were still trending weaker, falling 11 cents in early trading to $25.63.
Also in the news, Gulf Power Co. said it was calling all $125 million of its 5.75% series 2011A senior notes due 2051.
“That’s kind of interesting, as it’s only a 5.75% coupon,” a trader said.
The notes traded on Friday at $25.85.
The call will occur on May 18 at a redemption price of par plus accrued interest.
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