Morning Commentary: Preferreds perk up despite weak U.S. GDP data; recent new issues remain firm

By Stephanie N. Rotondo

Seattle, Jan. 29 – Preferred stocks were gaining ground in early Friday trading, as weak GDP data suggested that the pace of interest rate increases might be slower than expected.

“Everything is trading strong today,” a trader said, speaking specifically about recently priced deals. However, he also noted that the “secondary market is up.”

The Wells Fargo Hybrid and Preferred Securities index was up 20 basis points at mid-morning.

GDP increased 0.7% in the fourth quarter, below the 0.8% growth rate that had been forecast.

Among recent new issues, Citigroup Inc.’s $900 million of 6.3% series S noncumulative preferreds were pegged at $25.25 early in the day.

The deal came Tuesday, upsized from $500 million and tighter than the 6.375% price talk.

Citigroup Global Markets Inc. was the bookrunner.

From Monday’s business, Qwest Corp.’s $235 million of 7% $25-par notes due 2056 were at par bid.

That issue was also upsized.

Deals priced by Bank of America Corp. and Wells Fargo & Co. last week meantime continued to be busy.

A trader said BofA’s $1 billion of 6.2% series CC noncumulative preferreds – priced Jan. 21 – “had run up late yesterday,” hitting a $25.55 to $25.60 area. Come Friday, the preferreds “pulled back” a bit to trade at $25.50.

Wells Fargo’s $875 million of 5.7% class A series W noncumulative perpetual preferreds were “hanging around” $25.40 to $25.45, the trader said.

That deal came Jan. 19.

Given that it was the final trading day of the week, no more new issues had been announced, but the trader commented that he “wouldn’t be surprised if we see something next week, as long as the market holds.”

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