Market steady amid shutdown; secondary trading 'decent'; Morgan Stanley lists on NYSE

By Stephanie N. Rotondo

Phoenix, Oct. 2 - The preferred stock market was still holding its own as the second day of a partial government shutdown came to pass.

"The secondary is flat for the most part," a trader said at midday, adding that trading was "not very liquid.

"There doesn't seem to be any major fund outflows going on," he added.

But activity picked up later in the session, as one market source saw "decent liquidity" in the secondary space.

"The market traded in a pretty narrow range for most of the day," the source said.

The Wells Fargo Hybrid and Preferred Securities index traded up 7 basis points.

Morgan Stanley & Co. Inc.'s $750 million of 7.125% series E fixed-to-floating rate noncumulative preferreds were admitted to the New York Stock Exchange on Wednesday, listing under the ticker symbol "MSPE."

The issue was up 2 cents at midday at $25.35 but by the close had fallen 4 cents to $25.29.

The securities were again topping the most actively traded list, with over 1.26 million shares changing hands.

A trader commented that the Morgan Stanley preferreds - a deal that came Sept. 24 - along with Citigroup Inc.'s $900 million issue of 7.125% fixed-to-floating rate series J noncumulative perpetual preferred stock (NYSE: CPJ) have been "pretty active."

"They've got a great structure," he said. "I think insurance companies like them."

Citi's shares were trading at $25.47 at midday, up 8 cents from the previous close. By day's end, the issue was up almost 3 cents to $25.417.

Of recent larger deals, the Allstate Corp.'s $350 million issue of 6.75% series C fixed-rate noncumulative perpetual preferreds is the only one that has yet to list. A trader speculated that the stock could begin trading on the NYSE as early as Friday but possibly not until early next week.

That deal came Sept. 23. The trader pegged the issue at $24.93 bid, par offered as of midday.

Paper closed at $24.92, up 7 cents, according to another source. The source said the issue was "pretty well traded."

And, Tsakos Energy Navigation Ltd.'s $50 million of 8.875% series C cumulative redeemable perpetual preferred shares were quoted at $24.30 bid, $24.45 offered for a small chunk of stock, the trader said.

The paper priced Sept. 26 and freed to trade on Tuesday.

As for the primary market, sources continued to expect the calendar to quiet down for the near-term as investors wait to see how the government will resolve its budget debate and when a partial shutdown will end. The looming debt-ceiling issue will also likely play a role, as the Oct. 17 deadline approaches.

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