Midday Commentary: PNC Financial to bring new issue; Apollo Residential frees; BNY Mellon comes in

By Stephanie N. Rotondo

Phoenix, Sept. 14 - A trader said there was low volume in the preferred market as of midday Friday as the market tries to discern what the Federal Reserve's third round of quantitative easing will mean.

The trader noted that the launch of QE3 will cause "oil and gold to run to the moon again."

The new issue calendar didn't let up just because it was Friday, however. PNC Financial Services Group Inc. said it intends to issue at least $250 million of series Q noncumulative perpetual preferreds.

Price talk is between 5.375% and 5.5%, according to a trader.

"It's going to price today," he said, seeing the issue trading around $24.75 in the gray market.

The joint bookrunners are Morgan Stanley & Co. LLC, Bank of America Merrill Lynch, Citigroup Global Markets Inc., J.P. Morgan Securities LLC and PNC Capital Markets LLC. The co-managers are Barclays and Sandler + O'Neill Partners LP.

Proceeds will be used for general corporate purposes, which may include advances to subsidiaries to finance activities, repaying debt and redemptions or repurchases of outstanding securities.

Meanwhile, Apollo Residential Mortgage Inc.'s new $150 million offering of 8% series A cumulative redeemable perpetual preferreds freed to trade Friday. The deal priced Thursday.

"It's doing well," a trader said, pegging the issue at $24.90 bid.

In other recent deals, Bank of New York Mellon Corp.'s new 5.2% series C noncumulative perpetual preferreds - a deal that priced Wednesday and freed in the early afternoon on Thursday - were quoted at $24.75 bid, $24.80 offered. That was down a bit from the previous session, though a trader speculated that the slip was "just because it's a new issue."

Away from recent issues, Ally Financial Inc.'s preferreds have consistently been active over the course of the week despite a lack of fresh news to act as catalyst.

According to one trader, "there's a pretty steady seller out there." The seller, he said, has been unloading the issue onto investors who are looking for a short-term play.

"It will be called, it should be called because of the credit quality," he said, noting that the 8.125% series 2 fixed-to-floating-rate trust preferreds (NYSE: ALLYPA) become callable in June 2013. At current prices, he said, it is a 3% yield to call, which makes it a reasonable play for money markets.

The issue was trading at $25.35 as of midafternoon, up 15 cents.

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