Preferred stocks remain firm despite low liquidity; NGL units power up; Morgan Stanley weakens

By Stephanie N. Rotondo

Seattle, June 26 – The preferred stock market was kicking the week off a bit timidly, a trader reported early in the session.

“It’s very quiet today,” he said.

Still, the space continued to trend higher, as the Wells Fargo Hybrid and Preferred Securities Index ticked up 8 basis points and the U.S. iShares Preferred Stock ETF rose 18 bps.

While preferreds did have an overall positive tone, one market source noted that the day’s most actively traded issues were trending mostly weaker.

“I’m not really sure why,” he said.

Given the day’s sleepy start, it was no surprise that there were no new issues announced. However, a trader reported that a non-rated real estate investment trust deal could be seen as early as Tuesday.

In the secondary, NGL Energy Partners LP’s 9% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (NYSE: NGLPrB) were “up pretty much all day,” a source said.

The preferred units rose 26 cents, or 1.06%, to $24.86, on nearly 832,000 units traded.

There was no fresh news out to cause the activity or the more than 1% gain.

The source thought the activity in the name – as well as the surge – was a little strange.

“It’s very illiquid and a poor credit,” he said. “Maybe it’s a little underrated on the credit side, but it’s still not good.”

Meanwhile, Morgan Stanley & Co. Inc.’s 6.875% series F fixed-to-floating rate noncumulative preferreds (NYSE: MSPrF) were also somewhat active. But unlike NGL, the securities firm’s preferreds were slightly lower, slipping 3 cents to $29.70.

The weakness in the name came as investors looked towards the Federal Reserve’s release of the CCAR results, the second round of the central bank’s annual stress tests. The CCAR results will show whether specific banks will be given approval to return capital to shareholders or not.

Last week, the first round of stress test results showed that all U.S. banks could weather a severe economic downturn. But Morgan Stanley was the one of the least prepared on the list, leaving investors with questions as to how its CCAR will turn out.

Among other banks, Ally Financial Inc.’s 8.125% series 2 fixed-to-floating rate trust preferred securities (NYSE: ALLYPrA) dipped 2 cents to $25.80.

Away from banks, Colony NorthStar Inc.’s 7.15% series I cumulative redeemable preferred stock (NYSE: CLNSPrI) traded similarly to its active peers – that is, it finished the session a touch weaker, dropping a nickel to $25.67.

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