Preferred market turns positive; Medley joins calendar; banks firm ahead of earnings

By Stephanie N. Rotondo

Seattle, Jan. 10 – The preferred stock market had a firm tone in Tuesday trading, though volume, for the most part, remained weak.

“I would anticipate it will stay that way through the end of the week,” a market source said. “Next week might open up a little bit more.”

The Wells Fargo Hybrid and Preferred Securities index was up 22 basis points. The iShares U.S. Preferred Stock index was up 38 bps.

The primary was experiencing “a quiet start to the year,” a trader said, though Medley LLC said it was planning an offering of $25-par notes due 2024.

“It’s going to be tiny,” the trader said of the deal, noting that a regulatory filing placed the amount at $28.75 total, including a $3.75 million greenshoe.

Still, the trader speculated the deal could grow to as much as $50 million.

The trader also noted that the deal would launch on Wednesday.

FBR Capital Markets, Incapital, BB&T Capital Markets, Compass Point, Ladenburg Thalmann & Co. Inc., William Blair and JonesTrading are running the books.

In the secondary, Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) and Freddie Mac’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) were traded actively during the session, though one source commented that “most of the [GSE] complex was not busy.”

Fannie’s paper fell 8 cents to $8.10 on more than 3 million shares traded. Freddie’s preferreds were up 3 cents at $7.68 with more than 2.8 million shares being exchanged.

Meanwhile, bank preferreds were busy – relatively, considering that overall volume was “really, really light,” according to a source – as the market prepares for the start of bank earnings season on Friday.

KeyCorp’s 6.125% series E noncumulative preferreds (NYSE: KEYPrI) ticked up a penny to $26.62, while Wells Fargo & Co.’s 5.85% series Q fixed-to-floating rate noncumulative preferreds (NYSE: WFCPrQ) inched up 4 cents to $25.54.

State Street Corp.’s 5.35% series G fixed-to-floating rate noncumulative preferreds (NYSE: STTPrG) gained a dime to close at $25.42.

Wells Fargo will kick off bank earnings season on Friday, along with Bank of America Corp. and J.P. Morgan Chase & Co. KeyCorp will come with numbers on Jan. 19, and State Street will follow on Jan. 25.

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