Preferreds perk up despite weak GDP data; recent new issues remain firm; oil names up

By Stephanie N. Rotondo

Seattle, Jan. 29 – Preferred stocks were gaining ground in Friday trading, as weak GDP data suggested that the pace of interest rate increases would 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 closed 50 basis points higher. The index was up 20 bps 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.

The issue finished at $25.45, up 5 cents.

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. However, the preferreds ultimately lost a bit of ground, falling a dime to $25.30.

That deal came Jan. 19.

Both issues continued to dominate trading, with over 1.2 million shares being exchanged in each security.

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.”

More upside for oil names

Continued gains in the price of crude oil helped oil and gas-linked preferreds gain ground on Friday – at least for the most part.

Vanguard Natural Resources LLC’s 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) rose $1.04, or 21.05%, to $5.98. Legacy Reserves LP’s 8% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) meantime earned 16 cents, or 5.08%, to end at $3.31.

Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP), however, faded 56 cents, or 7.01%, to $7.43.

For its part, domestic crude improved 1.29% on the day, finishing at $33.65 a barrel. While still up, the commodity was up even higher earlier in the session. The modest retreat was due to word that Iran did not intend to participate in any plan to cut production.

Earlier in the week, Russia said that it would be willing to lower oil output amid a global supply glut. OPEC member Saudi Arabia has also reportedly agreed to at least talk about a production slowdown.

Russia, a non-OPEC member, has not cut production in 15 years. Saudi Arabia, as well as some other OPEC members, have been hesitant to slash output even as the price of oil has plummeted.

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