Preferred stock market eyes Fed meeting; Validus issue frees to trade, moves above par

By Stephanie N. Rotondo

Seattle, June 13 – Preferred stock trading was on the muted side on Tuesday – though with a few exceptions – as the market turned its eyes toward the Federal Reserve.

The central bank kicked off a two-day policy meeting on Tuesday, and investors are waiting to see if the Fed will opt to raise interest rates or not. One Reuters report indicated that there is a 94% chance that rates will rise, but one preferred stock trader wasn’t so sure.

“I’m not expecting a hike anytime soon,” he said. “I don’t think the current economic growth warrants a hike. Washington is stalled out, so we won’t see a tax cut or housing reform this year.”

But another market source agreed that an increase would likely occur, pointing to “general economic data.”

The Wells Fargo Hybrid and Preferred Securities index was up 11 basis points. The U.S. iShares Preferred Stock ETF was up 23 bps.

As for the day’s dealings, Validus Holdings Ltd.’s $250 million of 5.8% series B noncumulative preference shares freed to trade during Tuesday’s session.

Also, the paper was already assigned a temporary trading symbol, “VRRHP.”

A source said the preference shares ended at $25.05. Another source echoed that level, deeming the shares up a nickel.

Earlier in the day, a trader pegged the shares in a $24.95 to par context.

BofA Merrill Lynch and Morgan Stanley & Co. LLC ran the books.

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