Preferred market improves amid heavy oil prices; stocks sink; RBS preferreds drift lower

By Stephanie N. Rotondo

Phoenix, Jan. 12 – The preferred stock market was fluctuating a bit in Monday trading, opening the day up, coming back to flat at mid-morning and then rising again by the end of business.

The Wells Fargo Hybrid and Preferred Securities index was up 8 basis points.

The moves in the preferred space came as oil prices were taking sizable hits once again. Both West Texas Intermediate and Brent crude lost over 5% on the day, trading with $45 and $47 handles, respectively.

“Oil keeps selling off, a couple bucks every day,” a trader said. “Anything tied to oil is getting hit.”

Among MLPs, Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) were off $1.05, or 5.07%, to $19.66. Vanguard Natural Resources LLC’s 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) were down 61 cents, or 3.02%, at $19.61.

Meanwhile, Goodrich Petroleum Corp.’s 10% series C cumulative preferreds (NYSE: GDPPC) declined 83 cents, or 9.14%, to $8.25, as the 9.75% series D cumulative preferreds (NYSE: GDPPD) dropped 40 cents, or 5%, to $7.60.

A trader remarked that overall liquidity in the market was improving as investors try to figure out “where oil is going to settle at, how it will effect inflation and what the Fed is going to do.”

Another market source agreed that trading volume was getting better.

“Volume was pretty light [on Monday], but not as light as it had been, say, a week ago,” he said.

The source also noted that there continued to be a lack of new issues hitting the tape. He speculated that the trend would continue “until banks start issuing earnings.”

The good news: JPMorgan Chase & Co. and Wells Fargo & Co. kick off bank earnings season on Wednesday.

RBS active, softer

Royal Bank of Scotland Group plc’s preferreds were mostly weaker in Monday trading, despite news out over the weekend indicating the bank was considering exiting Asia – a move that would “be good for them,” according to a market source.

Still, the 5.9% noncumulative guaranteed trust preferred securities (NYSE: RBSPE) were dominating trading among paying securities, with about 660,000 shares being traded. The issue ended the day off 17 cents at $24.28.

The Edinburgh, Scotland-based bank that is majority-owned by the United Kingdom’s government is reportedly working to put most of its corporate banking unit in Asia up for sale. The effort would be part of the company’s overall plan to turn itself around after six consecutive quarterly losses.

One source said a sale would be a good idea, as it could mean the company’s regulatory capital would be in a better position.

As such, he did not think the day’s losses in the preferred stock were driven by the news.

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