Preferreds see light volumes, positive tone; Fannie Mae, Freddie Mac active on headlines

By Stephanie N. Rotondo and Christine Van Dusen

Phoenix, Nov. 15 - Liquidity was thin and issuance was nil, but the tone was firm for preferred stocks on Friday, with issues from Fannie Mae and Freddie Mac among the most active during the session.

The overall picture for preferred stock was fairly positive on Friday, with the Wells Fargo Hybrid and Preferred Securities index ending the session up 9 basis points on an index basis, a market source said.

"Volume was light but the market was up," he said. "We actively traded Fannie Mae and Freddie Mac on all the news stories."

The mortgage finance companies were in the spotlight after Bill Ackman's Pershing Square Capital Management took large stakes of the agencies' common stock, a trader said. This came amid reports that a private investor group led by Fairholme Capital Management LLC had put together a proposal to take the agencies' mortgage-backed securities insurance units private.

In response, Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were down 8 cents to $8.82 in early trading and finished Friday off 6 cents, with more than 4 million shares traded for the day. Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up 11 cents, or 1.27%, at $8.79.

"Very mixed," the market source said.

Another issue that stood out in trading on Friday was ING Groep NV's 6 3/8% perpetual hybrid capital securities (NYSE: INGISF), which ended the session up 20 cents at $24.03 on volume totaling 156,653. Deutsche Bank Contingent Capital Trust III's 7.6% trust preferred securities (NYSE: DBDTK) finished Friday at $26.00, up 4 cents, on 151,987 shares traded.

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