Preferreds up as oil sees modest rebound; energy names ‘bounce’; rebalance spurs activity

By Stephanie N. Rotondo

Phoenix, Jan. 7 – Preferred stocks were again firming up in Wednesday trading, helped in part by a rebound in oil prices.

“Energy stocks are bouncing because oil has settled down,” a trader said, also noting that the long bond was trading off a bit.

The Wells Fargo Hybrid and Preferred Securities index ended the session up 24 basis points. It was up 14 bps at mid-morning.

One market source noted that the index was up around 20 bps for most of the day; then, “in the last 10 minutes it jumped another 5 points.”

In the energy realm, Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) closed up 16 cents at $20.79. The units were up 47 cents, or 2.28%, early in the session, trading at $21.10.

Goodrich Petroleum Corp.’s 10% series C cumulative preferreds (NYSE: GDPPC) were also initially higher, putting on 16 cents, or 1.8%, to trade around $9.04.

But by the end of the day, the paper – as well as the 9.75% series D cumulative preferreds (NYSE: GDPPD) – retreated into negative territory.

The 10% preferred shares fell 45 cents, or 5.07%, to $8.43, while the 9.75% preferreds lost 54 cents, or 7.02%, to end at $7.15.

On Wednesday, the company’s top executive, Robert C. Turnham, held one-on-one meetings at the Goldman Sachs Global Energy Conference in Miami. The oil producer has scheduled several more such meetings at conferences throughout the month.

The price of oil was rebounding during the session, but it did lose some of those gains by the bell. In fact, Brent crude oil finished in the red, declining 29 cents to $50.81 per barrel for February deliveries.

West Texas Intermediate crude meantime gained 43 cents to $48.36.

But while the market – and energy in particular – was experiencing a rally, trading volume remained muted, according to a trader.

“There’s really not a lot going on,” he said.

“Volume was low again,” said another source.

Rebalance moves preferreds

While overall liquidity was subdued, a couple of the day’s most actively traded issues were ones that will be included in an upcoming rebalance of the S&P U.S. Preferred Stock index.

The rebalance will take effect on Jan. 16.

State Street Corp.’s 6% series E noncumulative perpetual preferreds (NYSE: STTPE) were among those names, ending the day up 2 cents at $25.24.

Also on that list were Public Storage’s 5.875% series A cumulative preferreds (NYSE: PSAPA), which gained 4 cents to close at $25.03.

The rebalance was announced Monday.

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