Preferreds finish week slightly positive on Yellen comments; Cedar Realty, Stellus list

By Stephanie N. Rotondo

Seattle, Aug. 25 – The preferred stock market started Friday’s session mixed but managed to end marginally positive as Federal Reserve chairman Janet Yellen defended financial rules put in place after the 2009 crisis.

The Wells Fargo Hybrid and Preferred Securities index firmed 5 basis points. The U.S. iShares Preferred Stock ETF ended up 1 bp, though it was down 3 bps at mid-morning.

In a speech at an annual central bank research conference, Yellen said regulations such as the Volcker Rule helped to strengthen the economy.

“The balance of research suggests that the core reforms we have put in place have substantially boosted resilience without unduly limiting credit availability or economic growth,” she said.

And while Yellen conceded that some changes to said reforms may be called for, those changes should be only minor alterations.

“Any adjustment to the regulatory framework should be modest and preserve the increase in resilience,” she said.

As for preferred dealings, there continued to be little going on. Traders continued to speculate that the recent muted nature of the market would stick around until after Labor Day.

There were, however, two new listings for the day, as Cedar Realty Trust Inc.’s $75 million of 6.5% series C cumulative redeemable preferred stock and Stellus Capital Investment Corp.’s $42.5 million of 5.75% $25-par notes due 2022 were both admitted to the New York Stock Exchange.

The tickers are “CDRPrC” and “SCA,” respectively.

Both deals priced on Aug. 16. Raymond James & Associates Inc. and KeyBanc Capital Markets were the joint bookrunners for Cedar’s public offering. Keefe Bruyette & Woods led the Stellus deal, and Janney Montgomery Scott LLC and Ladenburg Thalmann & Co. Inc. acted as co-lead managers.

Cedar’s preferreds were trading off a 7 cents to $24.55 post-listing. Stellus’ notes were meantime up a nickel at $25.07.

Stellus – which was the more actively traded of the two new listings – was initially lower on the day.

Meanwhile, U.S. Bancorp’s 6.5% series F fixed-to-floating rate noncumulative preferreds (NYSE: USBPrM) were once again topping the charts.

The preferreds closed at $28.95, up 2 cents.

About 2.62 million of the preferreds changed hands.

On Wednesday, a market source said a surge in volume in the U.S. Bancorp $25-par preferred was due to an arbitrage situation, as the disparity between the bank’s $25-pars and $1,000-pars widened. Come Friday, that same source speculated that the same scenario could have been responsible for the day’s activity.

“Over 2 million of the shares traded were from one very big trade,” he said. “The rest of the day’s trading amounted to less than 100,000 shares [apiece].”

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