Preferreds down in light trading; Wells Fargo recoups losses; Fidus Investment improves

By Abigail W. Adams

Portland, Me., Feb. 14 – The preferreds market ended Wednesday down in a trading session that saw light volume.

The Wells Fargo Hybrid & Preferred Securities Financial index seesawed between positive and negative territory early in the day but remained mostly flat throughout the session.

However, the index saw losses in the last half an hour before the market close, a market source said.

While trading volume was light across the board, there were one or two exceptions, a source said. Wells Fargo & Co.’s depositary shares representing 8% series J non-cumulative perpetual preferred stock recouped last weeks losses in high volume trading activity on Wednesday.

Fidus Investment Corp.’s recently priced 5.875% notes due 2023 were also up on Wednesday. The notes listed for trade on Nasdaq under the ticker “FDUSL” last week.

The market

The preferreds market saw another down day on Wednesday with both the Wells Fargo Hybrid & Preferred Securities Financial index and the U.S. iShares Preferred Stock ETF ending the session with losses.

The index was largely flat throughout the day, a market source said.

However, the index was pushed into negative territory about one-half hour before the closing bell and ended Wednesday down 0.08%.

The U.S. iShares Preferred Stock ETF closed Wednesday down 0.19%.

The new offerings of preferreds have been few and far between as volatility strikes the broader equity markets. There are rumors, though, that new deals are coming, a market source said.

However, underwriters are waiting for markets to calm down. “They don’t want the risk,” a market source said.

With the consumer price index up 0.5% and the core consumer price index up 0.3% in January, fear of rising inflation and an acceleration of interest rate hikes from the Federal Reserve continue to impact the markets.

Equity markets weathered the inflation data fairly well on Wednesday, but bond markets experienced a sell-off with 10-year Treasuries hitting their highest yield in four years.

Trading volume was light across the board in the preferreds market Wednesday, with one or two exceptions, a market source said.

Wells Fargo recoups losses

Wells Fargo’s depositary shares representing 8% series J non-cumulative perpetual preferred stock were one of the exceptions to the light trading volume in the preferreds market on Wednesday.

The depositary shares recouped some of the losses experienced last week and closed Wednesday at $26.00, an increase of 15 cents, or 0.58%.

The depositary shares saw trading volume of about 1.3 million shares. Average trading volume for the shares is 190,000.

The depositary shares have largely recouped the losses they experienced when the financial services firm got hit with a consent cease and desist order from the Federal Reserve on Feb. 5, which pushed the shares down to $25.70.

Wells Fargo was again the focus of headlines on Wednesday.

Sen. Elizabeth Warren, D-Mass., sent a letter to Wells Fargo CEO Tim Sloan chastising him for problems in issuing customers a refund while Berkshire Hathaway vice chairman Charlie Munger expressed confidence in the bank.

Fidus lists

While there has been a break in new deals, Fidus Investment’s recently priced 5.875% notes due 2023 were up on Wednesday after listing for trade on Nasdaq last week.

The 5.875% notes closed Wednesday at $25.20, an increase of 5 cents, or 0.2%.

Fidus’ baby bonds are one of the few recent deals to trade above their issue price. Fidus priced $43.48 million of the $25-par five-year notes on Jan. 31.

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