Preferreds hold gains as Fed keeps rates steady; Citigroup frees; Qwest inches toward par

By Stephanie N. Rotondo

Seattle, Jan. 27 – The preferred stock market ticked up on Wednesday as the Federal Reserve released its latest statement.

While preferreds bucked the overall trend of the day – the common equity market got trounced – a market source noted that the space lost a few steps after the central bank said it was keeping rates steady for the time being.

“Volume was light, which isn’t a surprise,” the source added. “It’s pretty common” ahead of big news, such as the Fed, for investors to hold back.

The Wells Fargo Hybrid and Preferred Securities index ended 24 basis points higher.

No new deals were announced on Wednesday, though recent new issues continued to be in focus.

Citigroup Inc.’s $900 million of 6.3% series S noncumulative preferreds – a deal priced Tuesday – freed to trade, according to a source.

The source saw the issue closing at $24.90. Earlier in the session, a trader quoted the preferreds at $24.82 bid, $24.87 offered.

As for Qwest Corp.’s $235 million of 7% $25-par notes due 2056 – a deal priced Monday and freed on Tuesday – they were pegged at $24.85 bid, $24.92 offered at midday.

At the close, a source said the notes were at $25.40, a level he didn’t find very accurate. He said the volume weighted average price of $24.88 “makes more sense.”

The source also commented that volume in that particular issue was “not a lot.”

From last week’s business, Bank of America Corp.’s $1 billion of 6.2% series CC noncumulative preferreds were seen “right around par” at $24.96 bid, $25.02 offered, according to a trader. However, the issue eventually finished even better than that, rising a dime to $25.10.

Wells Fargo & Co.’s $875 million of 5.7% class A series W noncumulative perpetual preferreds were meantime pegged at $25.05 bid, $25.12 offered early on in the day. The preferreds closed at $25.03, up 8 cents.

BofA brought its deal on Thursday and is trading with a temporary ticker of “BKRRP.” Wells Fargo came Jan. 19 and is trading under the symbol “WLGGP” for the time being.

Looking ahead, a trader said “hopefully we will see something from JPMorgan or Goldman Sachs next.”

RBS fades

Away from new issues, Royal Bank of Scotland Group plc was volatile in trading after the Edinburgh, Scotland-based bank said it was taking a massive charge on its quarterly results due to its pension contributions.

Because of the charge, the bank is expecting to record a loss for all of 2015.

At the open, RBS preferreds were mixed, but by the bell, the issues were trending negative.

The 6.08% noncumulative guaranteed trust preferred securities (NYSE: RBSPG) were off 7 cents at $24.81, while the 5.9% noncumulative guaranteed trust preferred securities (NYSE: RBSPE) were off a like amount at $24.58.

RBS said Wednesday that it would book a £3.6 billion charge against the value of its assets as it took measures to fill a gap in its pension obligations. Also part of that charge is litigation costs – both current and ongoing.

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