Morning Commentary: Preferred stocks rally as China cuts rates, oil rises; recent deals rebound

By Stephanie N. Rotondo

Phoenix, Aug. 25 – Preferred stocks were rebounding with the broader markets in early Tuesday trading.

The rally came after China’s central bank said it cut its one-year lending rate, a move aimed at bolstering liquidity and supporting the economy. The bank made the decision to cut rates following heavy losses in the Asian markets, which then bled into the global markets on Monday, causing hefty losses in U.S. equities.

A rebound in crude oil prices was also pushing things up. Benchmark crude had dropped over 5% in Monday trading but was up nearly 3% early Tuesday.

It was also noted that “a lot of people are out on vacation this week.” A trader speculated that Monday’s massive sell-off was due at least in small part to there being more empty desks, as there was “no one to step in” and dampen the panic.

The Wells Fargo Hybrid and Preferred Securities index was up 34 basis points at mid-morning.

As the strength came back into the marketplace, recent deals – which had gotten pushed down in the previous session with the rest of the market – were moving back up.

Southern California Edison Co.’s SCE Trust IV’s $325 million of 5.375% fixed-to-floating rate trust preference securities were quoted at par bid, $25.05 offered.

The paper opened at $24.85.

A market source said the issue – which came Aug. 17 – will begin trading on the New York Stock Exchange on Wednesday under the symbol “SCEPJ.”

Capital One Financial Corp.’s $500 million of 6.2% fixed-rate series F noncumulative preferreds – another deal from Aug. 17 – are also expected to list soon, according to the source.

However, the source did not have a definitive date.

The ticker symbol will be “COFPF.”

That paper was also moving higher, trading up 12 cents to $24.82.

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