Fed worries, empty desks weigh on preferreds; Integrys Energy frees up, inches to par

By Stephanie N. Rotondo

Phoenix, Aug. 13 - Preferred stocks were selling off Tuesday as investors feared that interest rates could soon rise.

"People are expecting the [Federal Reserve] to start tapering [its bond repurchase program], they're expecting that to be announced at the next meeting," a trader said.

The trader noted that retail sales - which were "good, or mixed at least" - were also playing a role, as the market believed that back-to-school sales might not be as stellar as hoped.

"There are not a lot of people around," he continued, as kids start going back to school. He said he expected the market to "see a lot of sideways trading until September."

At the end of the day, a market source said that it was "mostly a one-way ticket down until the last 15 minutes of the day," though the late-day rally did not help the market end positive.

"Volume was super light in the morning, but it got better in the afternoon," the source noted, adding that liquidity was still "not great."

Integrys Energy Group Inc.'s newly priced 6% fixed-to-floating rate junior subordinated notes due 2073 - a $400 million issue that came Monday - was seen offered at $24.68 at midday.

The issue had yet to free from the syndicate at that time, according to a trader. But a source said the issue had freed by the end of business.

The source saw the issue closing at par, with a volume weighted average price of $24.785.

In the secondary, financials were dominating, but mixed.

Ally Financial Inc.'s GMAC LLC-linked 7.3% public income notes due 2031 (NYSE: GMA) traded up nearly 6 cents to $24.91. Goldman Sachs Group Inc.'s 5.5% series J fixed-to-floating rate noncumulative preferreds (NYSE: GSPJ) dipped 17 cents to $23.13.

And, US Bancorp's 6% series G fixed-to-floating rate noncumulative perpetual preferreds (NYSE: USBPN) lost a penny, closing at $26.80.

Royal Bank of Scotland Group plc was meantime trading actively, though on no fresh news.

"There's no reason other than it's a very technically traded [name]," a source said, adding that most of the issues - especially larger issues like the 7.25% series T noncumulative dollar preference shares (NYSE: RBSPT) - were "widely held."

The Ts ended the day up 20 cents at $23.40. The 6.6% series S noncumulative dollar preference shares (NYSE: RBSPS) were 24 cents better at $20.79.

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