Yellen comments, data point to rising odds of interest rate hike; preferred market gyrates

By Stephanie N. Rotondo

Seattle, Feb. 15 – Preferred stocks were mildly better on Wednesday, though the space was weaker at mid-morning.

One trader attributed the initial softness to “follow-through after [Federal Reserve chairman Janet] Yellen’s comments yesterday.”

On Tuesday, Yellen spoke to the Senate Banking Committee and indicated that it would be better for the central bank to act quickly on interest rates, though with caution.

A slurry of economic data – including the latest inflation numbers – seemed to point toward the increasing possibility that rates could move up as soon as March. Specifically, inflation figures rose above the Fed’s 2% target range last month at 2.3%.

“We’ll most likely see a rate hike because of that, maybe sooner than later,” a trader said.

The Wells Fargo Hybrid and Preferred Securities index closed up 10 basis points, after being off 11 bps at mid-morning. The U.S. iShares Preferred Stock index was unchanged to slightly lower in early dealings but ended 12 bps higher.

The market continued to wait for Medley LLC’s $28.75 million add-on offering to its 7.25% $25-pat notes due 2024 (NYSE: MDLQ), a deal that was announced Monday.

The notes ended the midweek session at $25.21, down a nickel.

Meanwhile, a source said that GSE preferreds “tend to be the most actively traded still.”

“Right or wrong, that’s another story,” the source said.

Fannie Mae and Freddie Mac preferreds were not only active but continued to be better.

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