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Morning Commentary: Preferred stocks remain firm despite low liquidity; NGL units power up
By Stephanie N. Rotondo
Seattle, June 26 – The preferred stock market was kicking the week off a bit timidly, a trader reported early in the session.
“It’s very quiet today,” he said.
Still, the space continued to trend higher, as the Wells Fargo Hybrid and Preferred Securities Index ticked up 9 basis points and the U.S. iShares Preferred Stock ETF rose 11 bps.
Given the day’s sleepy start, it was no surprise that there were no new issues announced. However, a trader reported that a non-rated real estate investment trust deal could be seen as early as Tuesday.
In the secondary, NGL Energy Partners LP’s 9% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (NYSE: NGLPrB) were on the busier side, rising 27 cents, or 1.10%, to $24.87.
There was no fresh news out to cause the activity, or the gain of more than 1%.
Meanwhile, Morgan Stanley & Co. Inc.’s 6.875% series F fixed-to-floating rate noncumulative preferreds (NYSE: MSPrF) were also somewhat active. But unlike NGL, the preferreds were slightly lower, slipping a nickel to $29.68 at mid-morning.
The weakness in the name came as investors looked towards the Federal Reserve’s release of the CCAR results, the second round of the central bank’s annual stress tests. The CCAR results will show whether specific banks will be given approval to return capital to shareholders or not.
Last week, the first round of stress test results showed that all U.S. banks could weather a severe economic downturn. But Morgan Stanley was the one of the least prepared on the list, leaving investors with questions as to how its CCAR will turn out.
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