Preferreds up on 'debt deal' optimism; Wells Fargo, Citigroup trade actively; BofA busy

By Rebecca Melvin

New York, Oct. 16 - The preferred stock market was stronger on Wednesday on optimism that a deal among U.S. lawmakers was imminent on the federal debt ceiling, a preferred trader said.

Preferreds popped along with the broader markets, a trader said. "Everything is up a little on the optimism that we are going to get a debt agreement by the end of the day," he said.

At the same time, there was a lid on things as market players opted for safety given that the fear of default was not off the table.

The preferred market dropped by about 15% when U.S. credit was downgraded in August 2011, the trader said, noting "People would rather be safe than sorry."

By the end of the day, the session's most active traders were Wells Fargo & Co.'s 8% series J noncumulative preferreds and Citigroup Inc.'s 7.125% series J fixed-to-floating-rate noncumulative preferreds, a New York-based trader said.

The Citigroup Js closed at $25.96, which was up $0.19, or 0.7%, on volume of 1,820,300 shares. It was recently listed on Sept. 25.

Shortly before midday, Bank of America Corp.'s preferred shares were flat to slightly higher after the Charlotte, N.C.-based financial services company reported third-quarter earnings that narrowly missed estimates.

"The Merrill Lynch shares moved up about 3 cents on average," a trader said.

"Bank of America's earnings looked to show a one-time profit that wasn't going to continue through, so we're not seeing them moving too much," the trader said.

Bank of America earnings surged on improved credit, loan growth and record deposit balances, but trading revenue and the U.S. mortgage market were weaker.

Third-quarter profit rose to $2.5 billion, which was up from $340 million in the year-earlier period. But revenue was lower than expected.

The Wells Fargo Hybrid and Preferred Securities index was up 3.04, or 0.22%, at 1,408.62.

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