Preferred trading subdued as Fed, rates remain in focus; rumor of Citi deal circulates; Bluerock lists

By Stephanie N. Rotondo

Seattle, Oct. 26 – The preferred stock market was moving up modestly Monday despite what one market source called “really light” volume.

The Wells Fargo Hybrid and Preferred Securities Index finished 18 basis points higher. Given the limited liquidity, the source said the gain “just means there is not an incredible amount of sellers out there.” As such, “it doesn’t mean that is where the market would end up being if there had ben heavier volume.”

As for the lighter volume, one trader pointed to investors’ concerns about Europe as well as the ongoing Federal Reserve interest rate saga.

The trader commented that different theories about the Fed’s looming rate increase continued to circulate. Some players, the trader said, are still predicting that rates will be upped, though expectations are that the increase will only be about an eighth of a percent. Others are opining that economic data will be the key to the central bank’s next move – though recent housing start figures were “a bad sign,” possibly indicating that an increase will be delayed.

“Some think the Fed may announce a moratorium on the liftoff,” the trader said. “If that is the case, everything that is tied to it could jump through the roof as people reach for yield.”

Away from FedWatch, the primary market was quiet as the week started.

However, a trader said there was “a rumor of a [Citigroup Inc.] deal this week, but I don’t know if that is going to be the case.”

Speculation is that if the deal does come, it will have a 6.25% dividend.

“We know that Citi still has preferreds to issue, so that wouldn’t surprise us,” another source said. Although the bank is currently ahead of its issuance program, “if I were them, given where rates are right now, I’d try to lock in as much capital as possible.”

The bank sold $1.5 billion of subordinated notes on Friday and $3 billion of senior notes last Monday.

Among recent deals, both Bluerock Residential Growth REIT Inc.’s $71.88 million of 8.25% series A cumulative redeemable perpetual preferred stock and UMH Properties Inc.’s $45.03 million of 8% series B cumulative redeemable preferred stock began trading on the New York Stock Exchange on Monday.

Bluerock’s ticker is “BRGPA.” UMH’s is “UMHPB.”

Both deals priced Oct. 15.

The Bluerock paper closed at $25.50, down from opening levels of $25.60. UMH was meantime pegged at $26.45, up from $25.75 at the open.

Kimco calls shares

Kimco Realty Corp. announced a redemption of its 6.9% series H cumulative redeemable preferreds (NYSE: KIMPH) for Nov. 25.

In the wake of the news, the shares slipped 53 cents, or 2.06%, to $25.17.

The New Hyde Park, N.Y.-based real estate investment trust will redeem the $175 million issue at par plus 19.1667 cents of accumulated and unpaid dividends.

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