Preferreds weaken but outperform Treasuries; Wells Fargo's 6.625% preferreds list on NYSE

By Stephanie N. Rotondo

Phoenix, Dec. 19 - Preferred stocks were soft in early Thursday trading, even as one trader speculated that the market was a good place to look for yield.

"[Based on] spreads versus corporates, preferreds are getting cheaper," he said. He noted that Merrill Lynch put out a report in October that said spreads were 75 basis points above the average in the last couple of years, and he speculated that they had even widened out more since the report was released.

Noting the downward movement of the market, another source said that Wednesday's announcement from the Federal Reserve might be an indirect culprit. The central bank said on Wednesday that it was modestly cutting back its bond repurchases but stressed that the low interest rates were here to stay for the foreseeable future.

But, Treasury bonds were "largely red," the source said, and such moves in that market tend to impact preferreds.

The source further commented that "preferreds probably outperformed" Treasuries.

As of mid-morning, the Wells Fargo Hybrid and Preferred Securities index was off 19 basis points. It managed to recoup some of that ground, finishing the day down just 7 bps.

In a quick turnaround, Wells Fargo & Co.'s $750 million of 6.625% series R class A fixed-to-floating rate noncumulative preferreds listed on the New York Stock Exchange on Thursday.

The deal priced Dec. 11. The ticker symbol is "WFCPR."

Paper was trading at $25.15 early in the day, after opening at $25.20 and rising as high as $25.24. Despite the low-tick, a trader said the issue had "moved up nicely."

The preferreds ended the day at $25.20.

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