Preferred stocks begin week with firm tone; Bank of America taps market for $1.4 billion

By Stephanie N. Rotondo

Phoenix, Oct. 20 – Preferred stocks were churning higher in Friday trading, though volume was generally muted.

“Generally speaking, everything is really muted,” a trader said. “High yield is just slightly higher.”

The Wells Fargo Hybrid and Preferred Securities index closed up 33 basis points.

In the primary, Bank of America Corp. brought a $1.4 billion offering of 6.5% series Z fixed-to-floating rate noncumulative perpetual preferreds.

The deal marks the first deal of size seen in many weeks as market volatility and a week of bank earnings pushed pause on the pipeline.

A trader said that “we’re hearing there could be another deal or so in the works.”

As to the secondary space, Fannie Mae and Freddie Mac preferreds were up 10 cents to 20 cents early in the session. But the preferreds finished the day weaker, as the agencies near a deal with the Federal Housing Finance Agency – its regulator – on easing lending standards for less-than-perfect borrowers.

The deal is also expected to include when banks will be required to buy back bad loans.

Bank of America brought $1.4 billion of 6.5% $1,000-par series Z fixed-to-floating rate noncumulative preferred stock on Monday.

One trader quoted the new issue at 101 bid, 101.125 offered. Another market source said he saw a 100.75 bid for paper.

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