Preferreds slightly weaker as Dow jumps 324 points; primary to be quiet ‘for a while’

By Stephanie N. Rotondo

Phoenix, Jan. 8 – Preferred stocks were “drifting up a little,” a trader said early Thursday, but came back by the end of the day to end just about unchanged or weaker.

The Wells Fargo Hybrid and Preferred Securities index closed down 3 basis points. It was up 10 bps at mid-morning.

By comparison, the Dow Jones industrial average was up about 324 points.

Though the preferred arena has been ticking higher for most of the week, the primary space has remained silent.

“I’m still hopeful the calendar could pick up,” a trader said, noting the fresh headlines indicating that Banco Santander needs more capital. “But right now, I’m not hearing anything.”

Another market source said he was hearing the calendar would be empty “for a while.”

In the secondary market, Fannie Mae and Freddie Mac paper was trading actively as investors reacted to a housing speech from president Barack Obama.

Investors were looking at the kind of language Obama used to see if they can discern his plans for government-sponsored entities going forward.

As previously reported, Keefe, Bruyette & Woods said in a research note published Monday that if he does not mention any specific housing reform bills currently being passed around – or forgoes mentioning the topic at all – it could indicate that Obama is abandoning his push to wind down the mortgage giants.

But the main crux of Obama’s speech was about how the government could help more “responsible buyers” get into new homes. As such, he introduced an initiative to lower federal mortgage insurance premiums.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were initially up 11 cents, or 2.76%, at $4.10, but closed off 2 cents at $3.97. Freddie’s fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were up 7 cents, or 1.75%, at $4.07.

The paper had been up 12 cents, or 3%, at $4.12 earlier in the session.

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