Morning Commentary: Preferreds head higher in first trading day of the month; recent deals dip

By Stephanie N. Rotondo

Seattle, Sept. 1 – The first trading day of the month was starting out with a firm tone for the preferred stock market.

The Wells Fargo Hybrid and Preferred Securities index was up 4 basis points at mid-morning.

Still, traders lamented that liquidity continued to be constrained.

“It’s going to be a very slow two days” ahead of the Labor Day holiday weekend, a trader opined. “These last two weeks have been just crazy slow.”

The upside, however, is that September’s new issue calendar is expected to be active, which should result in some activity, the trader added.

As for early dealings, the trader did appear to be correct: Trading was very slow, with even recently priced issues – which have made up the bulk of the activity of late – moving much less than they have all week.

Qwest Corp.’s $977.5 million of 6.5% $25-par notes due 2026 (NYSE: CTBB) – consisting of $850 million sold on Aug. 11 and a fully exercised greenshoe of $127.5 million – retreated from Wednesday’s highs, slipping 3 cents to $25.97. Legg Mason Global Asset Management’s $500 million of 5.45% $25-par junior subordinated notes due Sept. 15, 2056 (NYSE: LMHB) – priced Aug. 3 – were off 2 cents at $25.14.

Away from newer issues, Freddie Mac’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were actually the dominating securities as of mid-morning. The paper was bucking the day’s upward trend, however, falling 19 cents, or 4.99%, to $3.62.

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