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Morning Commentary: Preferred stock market lower ahead of Fed news; NuStar units list on NYSE
By Stephanie N. Rotondo
Seattle, May 3 – Preferred stocks were flat to a little lower early Wednesday as the market looked forward to hearing if the Federal Reserve planned to raise interest rates or not.
The central bank’s Federal Open Market Committee began its two-day policy meeting on Tuesday. Its action – or inaction – on rates will be announced around mid-afternoon on Wednesday.
The Wells Fargo Hybrid and Preferred Securities index was flat at mid-morning. The U.S. iShares Preferred Stock ETF was down 8 basis points.
The primary continued to be silent, though a trader said that could change in the “next week or so.”
The trader remarked that he was hearing the pipeline was starting to build up, mostly with master limited partnerships and business development companies.
NuStar Energy LP’s $350 million of 7.625% series B fixed-to-floating rate cumulative redeemable perpetual preferred units listed on the New York Stock Exchange on Wednesday, as was expected.
The ticker is “NSPrB.”
The paper was trading at $25.35 in early dealings, which compared to $25.43 at the open.
The deal priced April 25, coming upsized from $150 million. Price talk was initially 7.875% but was later revised to 7.625% to 7.75%.
Wells Fargo Securities LLC, BofA Merrill Lynch, Morgan Stanley & Co. LLC and UBS Securities LLC were the joint bookrunners.
Meanwhile, activity in GSE-linked preferreds was picking up a little bit, after being rather lackluster on Tuesday despite Freddie Mac reporting earnings.
But like Tuesday’s session, the preferreds remained in retreat.
Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were off 60 cents, or 8.45% at $6.50. Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) were down 59 cents, or 8.48%, at $6.37.
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