Morning Commentary: Preferreds firm as bank earnings season begins; Monmouth paper declines

By Stephanie N. Rotondo

Seattle, July 14 – The preferred stock market was trending upward early Friday as bank earnings season kicked off.

Reporting banks – including J.P. Morgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. – all reported better-than-expected profits, though revenues were on the weaker side.

The Wells Fargo Hybrid and Preferred Securities index was up 10 basis points at mid-morning. The U.S. iShares Preferred Stock ETF was up 13 bps.

While bank earnings did beat expectations – mostly – there wasn’t much reaction in bank-linked preferreds.

In fact, the most active security at mid-morning was Monmouth Real Estate Investment’s 6.125% series C cumulative redeemable preferred stock (NYSE: MNRPrC).

However, there was no fresh news to cause the surge in activity or the over 1% decline.

The preferreds were off 26 cents, or 1.02%, at $25.25.

Of the week’s new issues, Two Harbors Investment Corp.’s $250 million of 7.625% series B fixed-to-floating rate cumulative redeemable preferreds were getting the most attention, as the paper continued to climb over par.

In early dealings, the preferreds were seen up 12 cents at $25.37.

The deal priced Wednesday, coming upsized from $75 million and tighter than the 7.75% initial price talk.

The issue was also assigned a temporary ticker, “TWHBP.”

Morgan Stanley & Co. LLC, UBS Securities LLC, J.P. Morgan Securities LLC and Keefe Bruyette & Woods Inc. ran the books.

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