Preferred stocks remain firm as China fears subside; primary calendar expected to build

By Stephanie N. Rotondo

Phoenix, July 17 – After a huge run up on Thursday, preferred stocks were continuing to gain ground in Friday trading.

One market source remarked that preferreds “spent most of the day bouncing around flat,” only to see a late-day spike.

The Wells Fargo Hybrid and Preferred Securities index ended up 32 basis points. The index was up 4 bps to 5 bps at mid-morning.

The index closed Thursday up more than 40 bps.

A trader remarked that “the biggest movers are up a dime,” adding that a slight gain in the long bond was helping.

A potential – and, if speculation can be believed, likely – interest rate increase later this year remained a hot topic, the trader said. Given the likelihood of the hike, as well as a stabilization of the markets, the trader said he “wouldn’t be surprised if we see a deal or two next week,” as issuers rush in to take advantage of the lower rates.

As for the stabilization of the market, that feeling was furthered as China established “plunge protection” for its equity markets, a mechanism that would prevent major sell-offs, such as the one the country experienced in recent weeks.

“That should help ease any fear people have about the Chinese markets,” a trader said.

Liquidity better

Overall, trading volumes were “clearly improved,” a source reported Friday.

However, he noted that most of the day’s activity occurred early in the day, leading to a quiet afternoon.

And while the market ended with a firmer tone, the most actively traded listed and paying securities were more mixed.

On the upside, JPMorgan Chase & Co.’s 6.1% series AA noncumulative preferreds (NYSE: JPMPG) rose a penny to $25.16, on about 3.38 million shares traded.

That issue was the most active of the day.

Meanwhile, SLM Corp.’s CPI-Linked series A notes due 2017 (Nasdaq: OSM) improved by a dime, ending at $23.88.

“I think those were probably oversold because of student loan issues at their affiliate Navient,” a source said.

Also better were CHS Inc.’s 7.5% class B series 4 cumulative redeemable preferreds (Nasdaq: CHSCL), which closed up 7 cents at $27.49.

On the downside were Aspen Insurance Holdings Ltd.’s 5.95% fixed-to-floating rate noncumulative perpetual preference shares (NYSE: AHLPC). Those shares finished off 6 cents at $26.05, with 1.33 million shares trading.

Taubman Centers Inc.’s 6.5% series J cumulative redeemable preferreds (NYSE: TCOPJ) were also weak, falling 2 cents to $25.30.

DTE Energy Co.’s 2012 series C 5.25% junior subordinated debentures due 2062 (NYSE: DTQ) were meantime a big loser on the day, dropping 52 cents, or 2.11%, to $24.16.

© 2015 Prospect News.
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