Preferred stocks pop as Fed raises interest rates; New York Community Bancorp firms

By Stephanie N. Rotondo

Seattle, March 15 – Preferred stocks gained ground on Wednesday, helped in part by the Federal Reserve’s decision to increase interest rates.

The Wells Fargo Hybrid and Preferred Securities index improved 65 basis points. The U.S. iShares Preferred Stock index was up 108 bps.

“The majority of [the gains] happened between 2 p.m. and 3 p.m. [ET],” a market source said.

Ahead of the Fed announcement, trading volume continued to be muted, according to a trader.

However, another source said liquidity was not all that bad, all things considered.

“We were busier than we had expected to be on a Fed Decision Day,” a source remarked.

The Fed’s Federal Open Market Committee began its two-day policy meeting on Tuesday. At its conclusion on Wednesday, the FOMC said it had upped rates to 0.75% to 1%.

Furthermore, the committee indicated that at least two more increases would be coming before the end of the year.

“There was word of a possible new issue,” a trader said. “But maybe [it’s coming] Thursday or possibly next week.”

As for recent deals, New York Community Bancorp Inc.’s $500 million of 6.375% series A fixed-to-floating rate noncumulative preferreds – a deal priced Friday – continued to be more active than most other securities. A trader said the paper was “moving up,” trading in a $25.50 to $25.60 range.

Another source called the issue up a dime at $25.64.

Over 1.61 million preferreds were traded.

Other recent issues were not as busy, however.

Two Harbors Investment Corp.’s $125 million of 8.125% series A fixed-to-floating rate cumulative redeemable preferreds were “hanging right around” $24.85, a trader said.

A second market source pegged the preferreds at $24.90, up a nickel.

The deal came March 7.

And, Spark Energy Inc.’s $35 million of 8.75% series A fixed-to-floating rate cumulative redeemable preferreds had a nice pop in early dealings, adding $1.19, or 4.8%, to trade at $26.00.

However, the paper ended the day down a penny at $24.80.

That issue came March 8.

Away from new issues, Wells Fargo & Co.’s 5.5% series X class A noncumulative preferreds (NYSE: WFCPrX) were busy, trading up 14 cents to $23.93.

Meanwhile, Goldman Sachs Group Inc.’s 6.375% series K fixed-to-floating rate noncumulative preferreds (NYSE: GSPrK) increased by 33 cents, or 1.21%, to $27.69.

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