European bank concerns, declining equities weigh on preferred market; Ally loses more ground

By Stephanie N. Rotondo

Portland, Ore., March 10 - Weakness in the underlying markets was putting pressure on the preferred stock market Thursday as well as concerns about the "European bank situation," according to a market source.

"Everything was weaker across the board," the source said. "Not a lot of people wanting to buy preferreds today."

"Sentiment has been more negative of late," he added.

In addition to what was going on in U.S. equities, investors were watching Europe as banks undergo another round of stress tests.

"There's nervousness about the whole sovereign issue," the source said.

Spain came out with the results of its private stress test, which showed that while the financial system needed more capital, it was mostly the case for smaller banks.

Still, "it sends ripples through the market," the source said.

The Ally Financial Inc.-guaranteed GMAC Capital Trust I trust preferreds continued to dominate trading. But the general tone of the market also continued to put pressure on the trust preferreds.

Away from Ally, bank issuers like Bank of America Corp., Citibank, NA and Royal Bank of Scotland Group plc were the day's most actively traded names.

Ally hybrids lose ground

Ally Financial's GMAC Capital Trust I 8.175% hybrid trust preferreds, series 2, dropped about 12 cents on the day, according to a trader.

The trader placed the shares at $25.60, down from $25.72 the day before.

The trust preferreds were, "not surprisingly," the most active issue of the day yet again, he noted.

Fitch Ratings gave the trust preferreds - issued to the U.S. Department of the Treasury in December 2009 and resold by the Treasury earlier this month - a B+ rating on Thursday.

Ally Financial, the former GMAC LLC, is based in Detroit.

Banks active but weaker

Among active bank issues, Bank of America's 8.2% series H preferreds slipped to $26.20, while Citibank's 7.875% series N preferreds lost "only a penny" to close at $27.10, a trader said.

Meanwhile, RBS' series T preferreds dove 21 cents lower, closing at $19.10. The series H securities, however, were only 2 cents cheaper at $22.70.

"Part of that difference is the level of risk," the trader remarked.

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