Rates Stabilize and Quality Preferreds Pop

The average preferred stock and baby bond rose about 12 cents/share today as rates relaxed a tiny bit as the FOMC ended their meeting with the expected resultant no rate increase.

As we reviewed the preferred stocks we were somewhat surprised to see that many of the issues with large gains were the investment grade issues. Obviously investors are clamoring for the extra 1/2% current yield they can garner because of the price beat down in these quality issues OR they believe that interest rates aren’t going higher.   In addition to these gainers the Colony Northstar preferreds which had been irrationally sold off in the last month took nice bounces of 1-2%.

Some quality gainers were–

Aspen Insurance 5.625% preferred (NYSE:AHL:D) popped 40 cents, Capital One 5.2% preferred (NYSE:COF-G) was up 29 cents, Gabelli Multimedia 5.125% (NYSE:GGT-E) was up 38 cents, Suntrust Bank 4% Variable Rate Preferred (NYSE:STI-A) was up 64 cents and Validus Holdings (NYSE:VR-A) 72 cents and VR-B 54 cents–all investment grade.

Now we await the employment report on Friday to see what this might bring to interest rates.  The ADP report today showed extremely strong job creation, but this report is not lent substantial credibility.