Fifth Third redemption pressures other callable preferreds, such as Wells Fargo, Citigroup

By Stephanie N. Rotondo

Portland, Ore., May 20 - While one trader noted that it was "very quiet" in the preferred market Friday, another said that it was a "whipsaw day."

"People kind of thought there would be some buy opportunity," the second trader said. "So there was a lot of up and down."

According to the second trader, the market is trying to "determine what the winners are going to be" in light of Fifth Third Bancorp's recent redemption announcement. The Cincinnati-based bank said it would call early about $450 million of trust preferreds.

That news had caused sell-off pressure for the bank, as well as any other TRUPs that had similar language - in other words, any preferreds that allowed for an early call.

Preferreds that could potentially be called early - or as one trader said, "infected" preferreds - were mostly lower Friday, as the market attempts to determine "who is not infected."

He said Wells Fargo's capital XIV trust preferreds were down "like 19 cents" on the day - trading in the high $26 range - but also noted that the securities were down from a high of $27.80 earlier in the week.

The paper - like many others, including Citigroup Inc.'s floating-rate series J preferreds and J.P. Morgan Chase & Co.'s series Z paper - has been weakening ever since Fifth Third Bancorp announced an early call on $450 million of its securities.

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