FOMC comments weigh on preferreds; U.K. banks sink as regulators say more capital needed

By Stephanie N. Rotondo

Phoenix, June 20 - Preferred stocks were "selling off," a trader said Thursday, in response to comments from the Federal Reserve's Federal Open Market Committee made on Wednesday.

"People are fearing that rates will go higher," he said, as the Fed looks to taper off its stimulus program in the next year.

"It was another rough day," a market source said, seeing the preferred space drop at least 1.2%.

The Wells Fargo Preferred Stock ETF (NYSEArca: PSK) was down 1.69% and the iShares S&P Preferred Stock Index (NYSEArca: PFF) lost 1.5%.

New issues remained unseen during the session, likely because of the weakness in the market. A trader said Full Circle Capital Corp.'s planned $30 million offering of $25-par notes due 2020 "seems to be doing well" and that pricing was expected on Tuesday.

"It could be earlier, but I doubt it," he said.

In the secondary, Royal Bank of Scotland Group plc, Lloyds Banking Group plc and Barclays Bank plc paper was softening after U.K. bank regulators said the institutions needed to raise more capital to shore up their balance sheets, though they would not be allowed to cut lending.

U.K. banks need capital

U.K.-based bank RBS, Lloyds and Barclays were told to raise more capital by the nation's banking regulators in an effort to shore up the institutions' balance sheets.

RBS took the biggest beating, as the Edinburgh, Scotland-based bank's move to the private sector has been sluggish, leading many to call for a break-up of the company.

RBS' 7.25% series T noncumulative dollar preference shares (NYSE: RBSPT) dropped $1.15, or 4.68%, to $23.42. In its bonds, the 6 1/8% notes due 2022 dropped 5½ points to a 94 handle.

Barclays' 8.125% series 5 noncumulative callable dollar preference shares (NYSE: BCSPD) were meantime down 8 cents at $25.29, while Lloyds' 7.75% Public Income notes due 2050 (NYSE: LYGPA) were off a quarter at $26.65.

RBS and Barclays were ordered to raise £3.2 billion and Lloyds needs another £1.7 billion, according to regulators.

The U.K. government holds stakes in both RBS and Lloyds, at 82% and 39%, respectively.

Meanwhile, HSBC Holdings plc's 8% exchangeable subordinated capital securities (NYSE: HCSPB) were down despite being given the all clear by regulators.

The securities fell 42 cents, or 1.53%, to $26.95.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.