Preferred stock sell-off continues despite broader market rally; Medley still a no-show

By Stephanie N. Rotondo

Seattle, Dec. 14 – Despite a rally in the broader markets, the preferred stock market’s recent rout continued into Monday trading.

“There was a lot of red out there in the market today,” a market source said. The source noted that the weakness “probably” had something to do with the Federal Reserve’s upcoming meeting on Wednesday, in which the central bank is expected to raise interest rates – finally.

But the source also pointed to broader “problems in the high-yield market” as a possible reason for the declines.

The Wells Fargo Hybrid and Preferred Securities index ended down 1.65% on the day. The index was off 46 basis points at mid-morning.

Still, the source said preferreds “slightly outperformed” long Treasuries.

Given the recent declines in the market, a trader said he was “waiting to hear what they are going to do with that Medley Capital [Corp.] deal.”

The New York-based business development company said Thursday that it was selling $25-par notes due 2021 via Keefe Bruyette & Woods Inc., Deutsche Bank Securities Inc., Sandler O’Neill & Partners LP and Janney Montgomery Scott LLC. Pricing was expected on Friday, but the deal was a no-show.

The trader remarked that he thought the deal would go through, unlike Cherry Hill Mortgage Investment Corp.’s proposed $50 million offering of series A cumulative redeemable preferreds, which was pulled on Tuesday.

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