Preferred stocks open week higher; GSEs active; Morgan Stanley’s 5.85% preferreds gain

By Stephanie N. Rotondo

Seattle, Feb. 27 – Going into the final trading days of the month, the preferred stock market had a firm feel.

The Wells Fargo Hybrid and Preferred Securities index ended the day up 6 basis points, though it was up 17 bps at mid-morning on Monday. The U.S. iShares Preferred Stock index was meantime up 8 bps, versus the 19 bps gain seen earlier in the session.

Most of the liquidity remained focused in GSE-linked paper. However, the issues were diverging a bit.

One market source deemed the paper “mixed,” though he added that the preferreds were “more up than down.”

Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) finished 12 cents higher, or 1.59%, at $7.66. The issue had dipped a nickel to $7.49 in early dealings.

Fannie’s series N preferreds (OTCBB: FNMFN) were up 22 cents, or 1.71%, at $13.12, while the series H preferreds (OTCBB: FNMAH) declined a dime, or 1.55%, to $6.35.

Freddie Mac’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) added 28 cents, or 4.02%, to close at $7.25.

The agencies’ preferreds have been on a mostly downhill slide since last week, when the U.S. Court of Appeals for the D.C. Circuit ruled against the plaintiffs in Perry Capital LLC v Mnuchin. The ruling claimed that the Recovery Act barred the plaintiffs from bringing certain cases against the government, though certain portions were remanded to the lower court.

On Thursday, Steven Mnuchin, the newly appointed Treasury Secretary, affirmed his commitment to address housing reform, though he conceded that it would take time.

He also indicated that he believed the 30-year mortgage market was an important part of the equation.

A source noted that “ironically” Warren Buffett said over the weekend that there was no longer a need for the GSEs.

However, the source said there didn’t appear to be any impact from Buffett’s comments.

Meanwhile, Morgan Stanley & Co. Inc.’s 5.85% series K fixed-to-floating rate noncumulative preferreds (NYSE: MSPrK) also continued to be more active than not, trading up 21 cents to $26.05.

On the down side, Deutsche Bank AG’s 7.6% trust preferred securities (NYSE: DTK) were a touch softer on reports the German bank had cut its executive bonus pool by about 80%, due in large part to ongoing – and mounting – legal costs.

The securities were down 2 cents, trading at $25.82.

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