Morning Commentary: Preferred stock market flat to begin week; KeyCorp eyes fixed-to-floating issue

By Stephanie N. Rotondo

Seattle, Dec. 5 – Preferred stocks were treading water in early Monday dealings.

The Wells Fargo Hybrid and Preferred Securities index was unchanged at mid-morning.

The market did see a new issue hitting the tape, a $250 million offering of series E fixed-to-floating rate noncumulative perpetual preferred stock from KeyCorp.

Price talk is in the 6.25% area.

A trader saw the issue quoted at $24.85 bid, $24.95 offered in the early gray market.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, UBS Securities LLC, Goldman Sachs & Co. and KeyBanc Capital Markets are running the books.

Dividends will be fixed through Dec. 15, 2026. At that point, the securities will float at Libor plus a spread.

The issue becomes redeemable on or after Dec. 15, 2026 at par plus accrued dividends. The preferreds can also be redeemed in whole upon a regulatory capital treatment event.

As for secondary trading, GSE-linked preferreds continued to be in focus. Following Friday’s trend, Fannie Mae and Freddie Mac paper was weakening.

Last Wednesday, the preferreds – which have been mostly better since the Nov. 8 election – got a huge pop, jumping as much as 50%. The gains were extended into Thursday – albeit not as much as the midweek session – but started to retreat come Friday.

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