Morning Commentary: Preferreds mixed ahead of Yellen speech; PennyMac lackluster post-pricing

By Stephanie N. Rotondo

Seattle, March 3 – The preferred stock market was mixed going into Friday trading.

The Wells Fargo Hybrid and Preferred Securities index was down 7 basis points at mid-morning, while the U.S. iShares Preferred Stock index was up 5 bps.

The mixed tone came ahead of a speech from Janet Yellen, Federal Reserve chairman, in Chicago. Investors will be looking to Yellen’s remarks for hints on whether or not the central bank plans to raise interest rates this month.

Over the course of the week, several Fed officials have indicated that the time is right to make a move, leading market watchers to give a March increase a 75% probability.

Late Thursday, PennyMac Mortgage Investment Trust priced an upsized $115 million of 8.125% series A fixed-to-floating rate cumulative redeemable preferreds.

The deal came in line with the 8.125% price talk and was upsized from $75 million.

The new issue was not faring all that well in early Friday dealings, however.

A trader pegged the paper at $24.50 bid, $24.55 offered, adding that it had not yet freed to trade as of mid-morning.

“They grew it a little bit and then handed it out to weak hands,” he said. “Now it is just kind of flipping around out there.”

Morgan Stanley & Co. LLC, Keefe Bruyette & Woods Inc. and RBC Capital Markets ran the books.

The dividend will be fixed through March 15, 2024, at which point it will begin floating at Libor plus 583.1 bps.

As for other deals from the week, Apollo Global Management LLC’s $250 million of 6.375% series A preferred stock – a deal priced Tuesday and freed early Wednesday – were seen “around $24.90,” according to a trader.

The paper is trading under a temporary ticker symbol, “APLMP.”

Price talk was initially in the 6.5% area but was revised to 6.375%, according to a source.

The deal came upsized from $150 million.

BofA Merrill Lynch, Morgan Stanley, UBS Securities LLC and Wells Fargo Securities LLC led the deal.

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