Preferred stocks hold on to gains as Fed votes to increase rates; Validus active, better

By Stephanie N. Rotondo

Seattle, June 14 – The preferred stock market continued to gain ground on Wednesday, both ahead of and after the Federal Reserve’s latest policy announcement.

The Wells Fargo Hybrid and Preferred Securities index was up 23 basis points. The U.S. iShares Preferred Stock ETF, while still better on the day, ended up only 9 bps. It was up 22 bps at mid-morning.

The Federal Reserve’s Federal Open Market Committee kicked off its quarterly meeting on Tuesday. Come Wednesday afternoon, the FOMC said that, based on relatively positive recent economic data, interest rates would increase to 1% to 1.25% from 0.75% to 1% previously.

The increase was the second hike in six months. The committee also indicated that one more increase this year may be warranted.

Like the previous increase, only one member of the FOMC voted against the raise.

In addition to its rate policy announcement, the FOMC also unveiled its plan to unwind its $4.5 trillion balance sheet, which is made up of Treasuries and agency securities.

One market source noted that “the selling timetable was accelerated from expectations.”

Meanwhile, Validus Holdings Ltd.’s $250 million of 5.8% series B noncumulative preference shares were busy, with over 2.9 million shares being exchanged.

The issue closed at $25.27, up 22 cents.

One trader quoted the issue in a $25.18 to $25.22 context, though another source called the paper up a nickel at $25.10.

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