Midday Commentary: Preferred stocks firm as week starts; Citigroup earnings beat expectations

By Stephanie N. Rotondo

Phoenix, April 14 - Preferred stocks were ticking higher as the short holiday week began.

The Wells Fargo Hybrid and Preferred Securities index was up 5 basis points as of mid-morning.

However, a trader noted that the secondary space was "stagnant," even as Citigroup Inc. reported first-quarter earnings that beat expectations.

The bank's preferreds were a little mixed after the release. The 6.875% series K fixed-to-floating rate noncumulative preferreds (NYSE: CPK) were steady at $26.10, while the 7.125% series J fixed-to-floating rate noncumulative preferreds (NYSE: CPJ) were up 2 cents at $26.62.

In the primary market, Wells Fargo & Co. announced an offering of $1,000-par series S class A fixed-to-floating rate noncumulative perpetual preferreds on Monday.

Price talk is 6% to 6.125%, according to a trader. Wells Fargo Securities LLC is leading the deal.

The new issue comes on the heels of the bank's earnings release on Friday, which showed a 14% increase in profit on a 3% decline in revenues.

The existing 6.625% series R fixed-to-floating rate noncumulative perpetual preferreds (NYSE: WFCPR) were unchanged, but active, at $27.25.

Meanwhile, Legacy Reserves LP's $50 million of 8% series A fixed-to-floating rate cumulative redeemable preferred units - a deal that came Thursday - freed to trade, a trader said.

He pegged the issue at $24.70 bid, $24.80 offered.

Stifel Nicolaus & Co. Inc., Barclays and MLV & Co. LLC are the joint bookrunning managers.

Dividends will be payable on the 15th day of each month. The dividend will be fixed through April 15, 2024, at which time it will begin floating at Libor plus 524 bps.

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