Preferred stock market firms up; new issue pipeline silent; JPMorgan deal busy, better

By Stephanie N. Rotondo

Phoenix, Feb. 12 – Preferred stocks were moving up Thursday following a U.S. jobs number that was “stronger than expected,” a trader said.

Also helping market sentiment was news that Russia and the Ukraine had hammered out a cease-fire agreement that is set to go into effect Saturday night.

“I thought we would have a little sell-off in Treasuries,” the trader said, as investors were less in a rush to hunt for quality.

But weak retail numbers and a Goldman Sachs report that suggested the Federal Reserve had no intent to raise rates “while we’re in a currency war” were also playing a role.

“So it’s a race to pick up extra yield,” the trader said.

The Wells Fargo Hybrid and Preferred Securities index ended up 11 basis points.

However, a market source speculated that the gains in the index did not necessarily accurately reflect the market as a whole.

“I think it should be half that,” he said. “It really shot up” in the final minutes of trading.

The primary space meantime continued to show no signs of life. A trader opined that deals could start popping up on Tuesday after the Presidents Day holiday on Monday.

On Wednesday, one market source speculated that issuance – particularly from big banks – could remain weak until the latest stress test results come out in mid-March. But another trader said those results are “not going to matter for some of them.”

“Some banks are in pretty good shape,” he said.

Furthermore, with rates where they are, it would be “wise” for issuers to enter the marketplace sooner than later, he said.

Trading volume improves

Investors continued to focus the bulk of their attention on JPMorgan Chase & Co.’s $1.38 billion of 6.125% series Y noncumulative preferreds in Thursday trading.

The preferreds were up 2 cents to $24.95, with almost 2 million shares changing hands.

Santander Bank’s floating-rate series 6 noncumulative guaranteed preferred stock (NYSE: SANPB) was also busy, with 1.73 million shares trading.

“That was pretty much driven by one customer selling and one buying,” a source said.

The shares finished the day at $21.44, up 7 cents.

Wells Fargo & Co.’s 5.85% series Q fixed-to-floating rate noncumulative perpetual preferreds (NYSE: WFCPQ) also saw trading of over 1 million shares – over 1.5 million, in fact – and the paper finished up 3 cents at $25.97.

UBS AG’s floating-rate noncumulative trust preferred securities (NYSE: UBSPD) meantime continued to improve following the company’s earnings results on Wednesday.

The preferreds closed up 15 cents at $20.02.

And, Regions Financial Corp.’s 6.375% series B fixed-to-floating rate noncumulative preferreds (NYSE: RFPB) gained 2 cents, ending at $25.20.

“With oil being up so much today, I’m kind of surprised that Regions didn’t do better than it did,” a source remarked, noting the bank’s “fair amount of exposure” to the industry.

West Texas Intermediate crude rose $2.38, or 4.87%, to $51.22 a barrel. Brent crude increased $2.39, or 4.37%, to $57.05.

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