Preferreds rebound; HSBC capital securities up, AGNC unscathed by sell-off

By Abigail W. Adams

Portland, Me., Feb. 7 – After a tumultuous start to the week, preferreds were up during Wednesday’s session as broader equity markets continued to be volatile.

The U.S. iShares Preferred Stock ETF underwent a significant sell-off like everything else in recent days, which has put pressure on the market, in particular non-rated preferreds, a market source said.

The market is repricing itself, “and the million dollar question is how do you value a value when you reprice the market,” the source said.

HSBC Holdings plc’s 8% perpetual capital securities exchangeable at the issuer’s option into non-cumulative preference shares, series 2, were up in active trading Wednesday. The capital securities are callable and have been for some time.

The active trading of the 8% securities can be traced to General Electric Co.’s decision to call two of its baby bonds, a market source said. The securities are trading at a premium and a call would be a negative for holders.

Activity surrounding GE’s outstanding 4.7% notes due 2053 has tempered since last week when GE called its 4.875% notes due 2052 and 4.875% notes due 2053. However, the 4.7% notes, which trade under the ticker “GEK,” continued to make gains.

AGNC Investment Corp.’s depositary shares representing 7% series C fixed-to-floating rate cumulative redeemable preferred stock were up in high volume trading on Wednesday.

The depositary shares emerged from the sell-off relatively unscathed, a market source said.

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