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Morning Commentary: Preferreds soft going into new quarter, month; State Street plans new issue
By Stephanie N. Rotondo
Seattle, April 4 – A preferred stock trader said profit-taking was weighing on the market in early Monday trading.
The Wells Fargo Hybrid and Preferred Securities index was off 35 basis points at mid-morning.
Preferreds have been on the rise of late, helped in large part by the Federal Reserve’s cautious approach to raising interest rates this year. But as a new quarter – and month – has begun, investors are taking some gains off the top.
The trader also noted that the Standard & Poor’s U.S. Preferred Stock index announced its rebalancing plans for the quarter. Effective April 15, the index will add 17 new preferred issues and drop four others.
“I thought we’d see some things bump up” on the news, which was first announced late Friday. However, the trader said there was not yet much reaction.
In the primary, State Street Corp. announced plans to sell at least $250 million of series G fixed-to-floating rate noncumulative perpetual preferreds.
Price talk is around 5.625%, according to a market source. Morgan Stanley & Co. LLC, BofA Merrill Lynch, UBS Securities LLC and Wells Fargo Securities LLC are running the books.
A trader said he was seeing quotes in a $24.95 to par context for the paper in the early gray market.
“It’s all institutional,” he said. “There’s not much happening on the retail side.”
In the wake of the new deal, the 5.9% series D fixed-to-floating rate noncumulative preferreds (NYSE: STTPD) were fizzling, falling 51 cents, or 1.89%, to $26.49.
The Boston-based bank plans to use the funds for the cash consideration portion of its acquisition of GE Asset Management.
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