Preferred stock market remains firm post-Fed; Global Indemnity in the market; Two Harbors lists

By Stephanie N. Rotondo

Seattle, March 16 – Preferred stocks continued to bounce in Thursday trading after rising on Wednesday in the wake of an interest rate increase from the Federal Reserve.

The Wells Fargo Hybrid and Preferred Securities Index improved 32 basis points. The U.S. iShares Preferred Stock ETF was up 21 bps.

On Wednesday, the Fed’s Federal Open Market Committee announced it had upped rates to 0.75% to 1%.

Furthermore, the committee indicated that at least two more increases would be coming before the end of the year.

A new issue hit the tape early Thursday, a $75 million sale of $25-par subordinated notes due 2047 from Global Indemnity Ltd.

Price talk is 7.875% to 8%, a market source reported.

The deal had not priced as of press time.

A trader saw the paper at $24.60 bid, $24.82 offered in the early gray market.

Morgan Stanley & Co. LLC, UBS Securities LLC and RBC Capital Markets are running the books.

Meanwhile, Two Harbors Investment Corp.’s $125 million of 8.125% series A fixed-to-floating rate cumulative redeemable preferred stock began trading on the New York Stock Exchange on Thursday.

The preferreds started the day at $25.20 but declined to $25.01 by mid-morning. By the bell, however, the issue had risen back up to opening levels.

Additionally, the preferreds traded more actively than they had been prior to officially listing, with over 615,000 shares changing hands.

The deal came to market on March 7, upsized from $75 million and at the tight end of the 8.125% to 8.25% price talk.

Morgan Stanley, UBS and Keefe Bruyette & Woods Inc. were the bookrunners.

As for other recent issues that have not yet listed, New York Community Bancorp Inc.’s $500 million of 6.375% series A fixed-to-floating rate noncumulative preferreds – a deal priced Friday – were benefitting from the day’s upward moves.

The preferreds rose 31 cents, or 1.21%, to $25.95.

Trading in the issue continued to outpace other recent deals, such as Two Harbors. Nearly 765,000 of the preferreds changed hands during the session.

The issue is trading under a temporary ticker, “NYBCP.”

Aside from recent issues, Fannie Mae and Freddie Mac paper was once again dominating, after taking a breather over the last several sessions.

But the GSE-linked preferreds bucked the day’s upward trend, trading off despite a lack of fresh news to act as catalyst.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) declined 50 cents, or 6.56%, to $7.15, on about 1.85 million preferreds traded. Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) fell 31 cents, or 4.27%, to $6.95.

About 1.58 million of those securities were traded.

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