Market lower despite 'strong' economic data; Fifth Third prices new deal; Ally sheds gains

By Stephanie N. Rotondo

Phoenix, Dec. 4 - Despite fresh "strong" economic data, preferred stocks were selling off in early Wednesday trading, according to a trader.

Still, it wasn't as bad as it could have been.

"I thought we'd see a decent sell-off," the trader said, noting that long Treasuries "sold off quite a bit." Instead, he said, "it's been very subtle."

The Wells Fargo Hybrid and Preferred Securities index was down 14 basis points as of mid-morning. By the end of business, the index was off a whopping 46 bps.

"It was a downward slide all day," noted another market source, adding that the index's decline was "obviously a lot."

Though new jobs and home sales numbers indicated an improving economy, that could also be a sign that the Federal Reserve will begin to taper its stimulus program sooner rather than later - an issue that has been driving the overall market since June when the Fed first said the beginning of the end was nigh. On top of that, a new survey from the central bank showed that even during the government's partial shutdown in October, the economy saw moderate growth.

Rumors of a new issue proved to be true, however, as Fifth Third Bancorp launched an offering of $450 million series I fixed-to-floating rate noncumulative perpetual preferreds.

Price talk was around 6.75%, but one trader said he was expecting that to be revised.

"It's mainly institutional," he said at midday. The issue saw a par trade in the early gray market, with the shares being bid at $24.92.

The deal came after the close at par to yield 6.625%. The issue begins to float on Dec. 31, 2023 at Libor plus 371 bps.

Another source said he had heard the deal was mainly being packed away to institutional buyers, though he wasn't sure why. As such, he said there "wasn't much gray market trading."

"But I heard it's doing well," he added.

The Cincinnati-based bank will use the proceeds from the sale for general corporate purposes, which may include common stock repurchases.

BofA Merrill Lynch, Goldman Sachs & Co., Morgan Stanley & Co. LLC and Wells Fargo Securities LLC are leading the offering.

Ally dips as GM sells stake

Ally Financial Inc. was again among the day's top trading securities, though this time it was the 8.5% series A fixed-to-floating rate perpetual preferreds (NYSE: ALLYPB).

The shares dropped 7 cents to $26.71. The 8.125% series 2 fixed-to-floating rate trust preferred securities (NYSE: ALLYPA), which saw significantly less trading volume, lost a dime to close at $26.79.

The Detroit-based bank and former lending arm of General Motors Co. was in the headlines again during the midweek session, as the company's former parent said it was selling off its stake in its offspring.

The car maker will sell about $900 million worth of stock in a private placement.

Armour, Brandywine mixed

Real estate investment trusts Armour Residential REIT and Brandywine Realty Trust were modestly active on Wednesday.

Armour's 7.875% series B cumulative redeemable preferreds (NYSE: ARRPB) saw trading of around 345,000 shares. The paper fell 7 cents to $20.19.

Brandywine's 6.9% series E cumulative redeemable preferreds (NYSE: BDNPE) meantime bucked the day's downward trend, adding 10 cents to end at $24.35.

About 305,000 shares were exchanged.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.