Morning Commentary: Markets react to Gross’ Pimco departure; Qwest’s new notes fall further

By Stephanie N. Rotondo

Phoenix, Sept. 26 – The markets were getting shook up Friday morning as it was announced that Pimco’s Bill Gross was leaving for Janus Capital Group, effective Monday.

“Pimco funds were getting annihilated with [Gross] leaving,” a preferred stock trader said.

Still, the preferred market was holding up relatively well, as the Wells Fargo Hybrid and Preferred Securities index was off just 4 basis points in early trading.

The day’s weakness – and the weakness seen over the course of the week, for that matter – was most evident in recent new deals.

A trader said that as the high-yield space began to sell off; so did preferreds, though they managed to “hold up pretty well.” Still, it was new deals that seemed to bear the brunt of the pain.

Qwest Corp.’s $500 million issue of 6.875% $25-par senior notes due 2054, for instance, were trading all the way down to $24.35, according to the trader.

“It looks cheap compared to the [Qwest] 7% [notes due 2052],” he said.

The Monroe, La.-based telecommunications company has two 7% issues coming due in 2052, one in April and one in July. Both are trading above par.

The new issue priced Monday.

Meanwhile, the Gabelli Healthcare & WellnessRx Trust’s $35 million of 5.875% series B cumulative perpetual preferred shares began trading on the New York Stock Exchange on Friday, as was expected.

The deal priced Sept. 17. The ticker symbol is “GRXPB.”

The preferreds were trading at $24.91 at mid-morning, down from opening levels of par.

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