Preferreds timidly rally early, then fade by the bell; Ares calls 7.75% $25-par notes

By Stephanie N. Rotondo

Phoenix, Sept. 29 – The preferred stock market was edging modestly higher in early Tuesday trading – following a hefty sell-off on Monday – but ultimately ended weaker yet again.

A market source said the weakness entered the market around mid-morning, and then it was “a pretty steady decline” for the rest of the day.

The Wells Fargo Hybrid and Preferred Securities index closed off 12 basis points after being up 1 bp earlier in the session. The index closed Monday down 24 bps.

Monday’s declines came as the broader markets also waned amid global and domestic economic uncertainties. And while the markets were all attempting at least a minor rebound on Tuesday, chatter was that stocks overall could be heading for a negative year.

Given the volatility seen in the marketplace of late, the new issue pipeline has all but dried up. A trader noted an article going around that said “a couple of bond deals have been shelved because of a lack of appetite from retail buyers,” a trend that has also pervaded the preferred space.

In the secondary, Ares Capital Corp. said it was redeeming all $200 million of its 7.75% $25-par senior notes due 2040 (NYSE: ARY).

The paper was initially trading down Tuesday, falling a nickel to $25.07. But by the end of the day, the notes had regained ground, ending unchanged at $25.12.

The redemption will occur Oct. 28.

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