Morning Commentary: Preferreds drift lower ahead of Fed minutes; Fannie, Freddie giving up gains

By Stephanie N. Rotondo

Phoenix, Feb. 18 – The preferred stock market was weakening in early Wednesday trading.

“Everything is dipping off the highs of yesterday,” a trader said, pointing specifically to the common equity markets and Treasuries.

The Wells Fargo Hybrid and Preferred Securities index was down 35 basis points at mid-morning.

The negative tone came ahead of the expected release at 2 p.m. ET of the minutes from the Federal Reserve’s January meeting.

Even Fannie Mae and Freddie Mac preferreds were giving up the some of the previous day’s gains.

“They are still popping around,” a trader said. “Most are down about 10 cents.”

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) declined 2 cents to $4.55. Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were down 16 cents, or 3.3%, at $4.69.

The agencies’ preferreds were up 9% to 12% on Tuesday as investors reacted to positive comments from activist investor Bill Ackman and a story regarding the government’s assertion of presidential privilege on some documents in a lawsuit with shareholders.

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