PNC Financial brings upsized new issue; QE3 seen as good for REIT new issues; BNY weakens

By Stephanie N. Rotondo

Phoenix, Sept. 14 - A trader said there was low volume in the preferred market as of midday Friday as the market tries to discern what the Federal Reserve's third round of quantitative easing will mean.

The trader noted that the launch of QE3 will cause "oil and gold to run to the moon again."

The new issue calendar didn't let up just because it was Friday, however. PNC Financial Services Group Inc. said it intended to issue at least $250 million of series Q noncumulative perpetual preferreds.

A trader said that it was "very strange" for a new issue to come out on Friday, but PNC did price the deal: $450 million at 5.375%, at the tight end of talk.

Meanwhile, Apollo Residential Mortgage Inc.'s new $150 million offering of 8% series A cumulative redeemable perpetual preferreds freed to trade Friday.

"It's doing well," a trader said. Another trader agreed, adding that Annaly Capital Management Inc.'s recent sale of 7.5% series D cumulative redeemable perpetual preferreds was also doing well. He attributed strength in both names to the Federal Reserve's recent announcement that it will start buying up mortgage-backed securities.

In other recent deals, Bank of New York Mellon Corp.'s new 5.2% series C noncumulative perpetual preferreds - a deal that priced Wednesday and freed in the early afternoon on Thursday - were coming in. A trader said that was due to the new PNC issue.

Away from recent issues, Ally Financial Inc.'s preferreds have consistently been active over the course of the week despite a lack of fresh news to act as catalyst.

According to one trader, "there's a pretty steady seller out there." The seller, he said, has been unloading the issue onto investors who are looking for a short-term play.

PNC ends week with new issue

PNC Financial priced $450 million of 5.375% series Q noncumulative perpetual preferreds on Friday.

Ahead of pricing, a trader saw the issue at $24.75 in the gray market.

At the close, a trader quoted the issue at $24.65 bid, $24.75 offered.

The joint bookrunners are Morgan Stanley & Co. LLC, Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Bank of America Merrill Lynch and PNC Capital Markets LLC. The co-managers are Barclays and Sandler O'Neill + Partners LP.

Proceeds will be used for general corporate purposes, which may include advances to subsidiaries to finance activities, repaying debt and redemptions or repurchases of outstanding securities.

PNC is a Pittsburgh-based financial services firm.

QE3 good for Apollo, Annaly

A trader said the Fed's decision to begin buying up to $40 billion of mortgage-backed securities per month was helping recent deals from Apollo Residential Mortgage and Annaly Capital.

At midday, a trader saw Apollo's new 8% preferreds at $24.90 bid. The deal priced Thursday and freed up on Friday.

After the bell, a trader called Apollo and Annaly the "big winners," placing both issues at or above par.

Annaly's $400 million of 7.5% preferreds priced Sept. 6.

PNC pressures BNY

BNY Mellon's new $550 million of 5.2% series C cumulative preferreds came in Friday, which a trader said was due to investors looking to get into the PNC deal.

Around noon, the preferreds were quoted at $24.75 bid, $24.80 offered. That was down a bit from the previous session, though a trader speculated that the slip was "just because it's a new issue."

The paper closed around $24.80, according to another trader.

Ally action up

Trading in Ally Financial has been heavy over the last week despite a lack of fresh news. One trader reported that sellers have been unloading the securities, which could be a good play for those looking for short-term investments.

"It will be called, it should be called because of the credit quality," he said, noting that the 8.125% series 2 fixed-to-floating-rate trust preferreds (NYSE: ALLYPA) become callable in June 2013. At current prices, he said, it is a 3% yield to call, which makes it a reasonable play for money markets.

The issue closed at $25.30, up a dime on the day. Nearly 4 million shares changed hands.

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