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Morning Commentary: Preferreds pressured, but liquidity light; market seen rich; new issues falter
By Stephanie N. Rotondo
Seattle, May 4 – The preferred stock market was kicking off Thursday trading with a weak tone, according to market indicators.
The Wells Fargo Hybrid and Preferred Securities index was down 20 basis points at mid-morning, while the U.S. iShares Preferred Stock ETF was off 22 bps.
Additionally, a trader said the market was “very quiet.”
“Everyone’s just sitting around, looking for value,” he said.
He noted a CreditSights report that opined that the new issue pipeline from banks was over and done with, unless the issue was being done to call another issue. Fixed-to-floating rate issues in particular could see an uptick in calls, especially if interest rates continue to rise as planned.
The trader further commented that the report confirmed that “everything is rich in the market right now.” As market players look for opportunities, “we could see some selling pressure in the secondary market.”
Recently priced issues were in fact under pressure on Thursday, in line with the market trend.
NuStar Energy LP’s $350 million of 7.625% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (NYSE: NSPrB) were off 14 cents in early trading at $25.14. Qwest Corp.’s 6.75% $25-par notes due 2057 (NYSE: CTDD) were meantime off a nickel, trading at par.
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