Summers ends run for Fed post; markets firm up as Yellen deemed frontrunner; Citigroup up

By Stephanie N. Rotondo

Phoenix, Sept. 16 - Preferred stocks were strong as the week began, spurred by news that Larry Summers had dropped out of the running to head the Federal Reserve.

"Everybody thought that the market would go nuts on this news of Summers withdrawing," a trader said. That was sort of the case, he said, though the market had come back in a touch.

Summers was considered the frontrunner to replace Ben Bernanke, but most "didn't know him that well," the trader said. Based on some comments Summers had previously made, it was widely believed that he would enforce "a much stronger" taper to the Fed's stimulus program.

Janet Yellen is now poised to take the seat, and the trader said her method to taper the bond-buying program would be easier for the market.

The trader noted that the Fed is holding a meeting later this week, which investors are also keeping a watchful eye on.

By day's end, however, the market "faded," a market source said, bringing the overall space down to flat.

Volume was exceptionally light, the source added, aside from Citigroup Inc.'s $900 million of 7.125% fixed-to-floating rate series J noncumulative perpetual preferreds. The new preferreds were assigned a trading symbol, according to a trader. That means the new issue could list on the New York Stock Exchange any day now.

The expected symbol is CPJ.

The trader saw the issue trading around par at midday. Another source said the paper finished at $25.02.

The source noted that over 2.8 million shares changed hands.

The deal came Thursday and freed up on Friday.

Lloyds news good for RBS

News that the British government was reducing its stake in Lloyds Banking Group and that Barclays Bank plc had commenced a £5.8 billion rights offering on Monday might have been giving investors warm thoughts toward Royal Bank of Scotland Group plc.

"It certainly didn't hurt," a market source said, adding that both events were credit positive, certainly for Lloyds and Barclays, but possibly for RBS itself.

For its part, Barclays' 8.125% series 5 noncumulative callable dollar preference shares (NYSE: BCSPD) finished the day off 18 cents at $21.84. RBS' most actively traded issue, the 7.25% series T noncumulative dollar preference shares (NYSE: RBSPT), were also down, losing a penny to close at $22.91.

The rest of the RBS structure, however, was firm. The next most active issue within that complex was the 6.08% noncumulative guaranteed trust preferred securities (NYSE: RBSPG), which put on 7 cents to end at $21.11.

The U.K. government said Monday that it was planning to sell 6% of its stake in Lloyds, which will reduce its stake to 33%.

As for Barclays' rights offering, the new funds are said to be going toward a capital hole that the government said needed to be filled.

Seaspan could call preferreds

Seaspan Corp. said Monday that it could repurchase up to $25 million of its outstanding 9.5% series C cumulative redeemable preferreds (NYSE: SSWPC).

The issue ended the day up 18 cents at $27.06.

The Hong Kong container ship company said its board had authorized the buyback. The authorization is valid through July 2014.

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