Morning Commentary: Preferred stocks climbing up in early trading; Fannie, Freddie reverse course

By Stephanie N. Rotondo

Seattle, Nov. 15 – The preferred stock market was attempting to rebound early Tuesday after spending the last week in a downward spiral.

“The long bond is rebounding and preferreds are following right behind that,” a trader said.

However, he added that he was unsure whether or not the rally “has legs or not.”

The Wells Fargo Hybrid and Preferred Securities index was up 88 basis points at mid-morning. The index dropped 133 bps in the previous session.

Fannie Mae and Freddie Mac preferreds – which have been actively trading upward since Election Day – were “taking a breather,” according to a trader, as investors looked to take some of the recent profits.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS), for instance, declined 32 cents, or 5.8% to $5.20. The 7.625% series R noncumulative preferreds (OTCBB: FNMAJ) were down 12 cents, or 2.4%, at $4.88.

Meanwhile, financials were getting pushed back up. Wells Fargo & Co.’s 5.5% series X class A noncumulative preferreds (NYSE: WFCPX) improved by 45 cents, or 1.95%, at mid-morning, trading at $23.91.

Ally Financial Inc.’s 8.125% series 2 fixed-to-floating rate trust preferred securities (NYSE: ALLYPA) were also better, rising 7 cents to $25.04.

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