Demand for Citibank’s (NYSE: C) TRUPs Indicates Market Approval

Citibank’s (NYSE: C) sale of $2 billion worth of preferred securities was successful, indicating that investors are ready to move back into investing in the troubled bank.

Analysts have considered Citibank the weakest of the mega-banks during the last year. The successful share of its preferred securities was a litmus test of sorts, which some analysts believe may bring strength back to financial stocks, just one year after prices of bank bonds and stocks hit multi-year lows.

Citibank’s “Citigroup Capital XII” sold $2 billion worth of 30-year fixed-rate/floating-rate trust preferred securities (called “TRUPS” by many) yielding a dividend of 8.5%, in lines with expectations of the sale.

Since financial stocks hit their low in March of 2009, many of the large-cap financial institutions have repaid their bailout funds, investors’ hunger for risk has recovered and banks have given up a safety net of government-backed bond insurance.

Shares on bonds of bailed out financial companies rose on Tuesday and Wednesday, fueled by statements made by analyst that the valuations on the bonds were cheap.

The price of an existing Citibank 30-year bond maturing in 2037 rose to 98.4 cents on the dollar on Wednesday, up from about 95 cents on the dollar on Tuesday.

Preferred securities are among the riskiest investment instruments that bondholders can buy because they are low down on the capital structure. If a bond issuer defaults preferred holders are among a group of investors that are the least likely to get repaid.

This article (Demand for Citibank’s (NYSE: C) TRUPs Indicates Market Approval) was originally developed by and is property of American Banking News. Checkout American Banking News for up-to-date banking news and peer to peer lending news.