Preferreds pressured, but liquidity light; market seen rich; new issues falter; GSEs mixed

By Stephanie N. Rotondo

Seattle, May 4 – The preferred stock market lost more ground on Thursday, following a steep decline in crude oil prices.

“It creates questions around the creditworthiness of the energy sector and that spreads to all credit concerns,” a market source said.

In fact, the market was giving oil’s drop more weight than the latest initial jobless claim report, which fell to a 17-year low.

The Wells Fargo Hybrid and Preferred Securities index dropped 31 basis points, while the U.S. iShares Preferred Stock ETF declined 28 bps.

Still, a trader said the market was “very quiet.”

The trader further commented 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 pressured during the session, 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) lost a dime, closing at $25.18. Qwest Corp.’s 6.75% $25-par notes due 2057 (NYSE: CTDD) also fell a dime, ending at $24.95.

Meanwhile, Freddie Mac’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) finished the session down 18 cents, or 2.77%, to $6.31.

However, Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) rose 23 cents, or 3.53%, to $6.74.

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