Morning Commentary: Preferred stocks follow broad market higher; bank earnings on tap; oil gains

By Stephanie N. Rotondo

Seattle, April 11 – Preferred stocks were “slightly green with the equity tape” in early Monday trading, according to one trader.

The Wells Fargo Hybrid and Preferred Securities index was up 21 basis points at mid-morning.

But while the market had a firm tone, the primary space remained quiet.

“I’m not hearing of anything new,” a trader said. “I was surprised. I figured we would see something come today or at least hear chatter of something for tomorrow.”

The trader noted that banks were likely waiting until after earnings to bring any new deal – JPMorgan Chase & Co. will kick-off the season with its results on Wednesday – but he thought other sectors might want to get in ahead of that.

“It’s not a bad time to come,” he said. For areas like real estate investment trusts, there are currently “attractive valuations” given the recent rise in the market. Rates are also still low.

“I would think it would make sense to come before bank earnings because after, they might get crowded out of the market,” he said.

As the primary had little goings-on, preferred stock investors were turning to the secondary space. A more than 2% gain in domestic crude oil prices was moving up the energy sector in early trades.

Oil pushed up to more than $40 a barrel on Monday, helped in large part by comments from Russia that its production in 2017 would likely remain flat year over year. However, several banks were expressing doubt that any production freeze deal coming out of Doha next week – when a group of OPEC and non-OPEC producers meet to discuss the proposal – would do much to help rebalance the commodity’s price.

Legacy Reserves LP’s 8% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) were up 66 cents, or 23.24%, at $3.50. The 8% series A fixed-to-floating rate cumulative redeemable preferred units (Nasdaq: LGCYP) were up 79 cents, or 28.62%, at $3.55.

Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) were meantime bucking the trend, falling about 10 cents, or 1.68%, to $5.60.

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