Preferred stocks edge lower in quiet session; August’s new issues stay busy; Ally slips

By Stephanie N. Rotondo

Seattle, Aug. 31 – The preferred stock market fell off in late-day trading after trading up for most of the day.

The Wells Fargo Hybrid and Preferred Securities index finished the midweek session down 2 basis points. The index was up 7 bps at mid-morning.

The weakness came as crude oil prices declined 3.3% to $44.82 a barrel after the U.S. Energy Information Administration reported that crude and refined products rose by 4.5 million barrels last week.

For its part, crude inventories climbed by 2.3 million barrels, more than the 1.2 million-barrel gain forecast by analysts polled by the Wall Street Journal. While gasoline stocks fell by 700,000 barrels, analysts were expecting a bigger draw.

As has been the case most of the month, liquidity remained subdued. Instead, market players were focused on end-of-the-month activities, especially given that nearly $5 billion in preferred securities had been redeemed during August.

Morgan Stanley & Co. Inc. and Bank of America Corp. made up the bulk of the redemptions, with the former taking out $2.83 billion in three series of capital securities and the latter redeeming $1.97 billion in trust preferred securities.

Additionally, Barclays Bank plc is gearing up to redeem $750 million of 6.625% preference shares on Sept. 15.

As previously reported, the preferred market is expecting September’s new issue calendar to be quite full.

Despite the late-day turn into the red, investors continued to push up recent deals from Qwest Corp., Legg Mason Global Asset Management, Entergy Arkansas Inc. and Entergy Louisiana LLC.

Qwest’s $977.5 million of 6.5% $25-par notes due 2026 (NYSE: CTBB) – consisting of $850 million sold on Aug. 11 and a fully exercised greenshoe of $127.5 million – rose 11 cents to $26.00 a share. Legg Mason‘s $500 million of 5.45% $25-par junior subordinated notes due Sept. 15, 2056 (NYSE: LMHB) – priced Aug. 3 – were meantime a penny higher at $25.16.

Entergy Arkansas’ $410 million of 4.875% $25-par first mortgage bonds due Sept. 1, 2066 – a deal from Aug. 9 – were a penny better at $25.01. Entergy Louisiana’s $270 million of 4.875% $25-par collateral trust mortgage bonds due 2066 (NYSE: ELC) meantime traded at par, a gain of 3 cents on the day.

That issue came Aug. 10.

Away from newer issues, Ally Financial Inc.’s 8.125% series 2 fixed-to-floating rate trust preferreds (NYSE: ALLYPA) were active but weaker in line with the day.

The preferreds dipped 2 cents to $25.26.

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