Fannie and Freddie continue to trend higher on speculation; Vanguard Natural down again

By Colin Hanner

Chicago, Feb. 6 – There was not a whole lot going on in the preferred stock market on Monday, a market source said, with the bulk of attention centered on speculation about government-sponsored enterprises Fannie Mae and Freddie Mac, which stirred higher movement in various issues.

“It was a very low-volume day, a pretty quiet day” the market source said. The preferred market mirrored the marginal upward movement seen in the equity market.

After posting a 14 basis point increase in the morning, the Wells Fargo Hybrid and Preferred Securities index finished up 11 bps on the day.

The iShares U.S. Preferred Stock index was up 5 bps.

In the news issue space, or rather, the lack thereof, a trader said on Monday morning that new issues by First Republic Bank and State Street Corp. were expected to come to market, though the source did not specify when.

A market source in the afternoon said he had not heard of any new issues.

GSE’s trade up

The speculation surrounding Steven Mnuchin, president Donald Trump’s nominee to head the Treasury Department, coupled with Friday’s report from Fitch Ratings on the likelihood of an overhaul to the GSE’s, continued to push Fannie Mae and Freddie Mac higher while their futures remain uncertain.

“There continues to be a lot of speculation on them, in terms of what is going to happen with respect to a new mortgage-financing agency coming out of the new [presidential] administration and what may or may not happen,” a market source said.

In the secondary market, Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up 7 cents, or 0.69%, to $10.16, a more than 30 cent decrease from mid-morning levels. More than 1.9 million securities traded on the session.

Fannie’s series O variable-rate noncumulative preferreds (OTCBB: FNMFN) were up 15 cents, or 0.83%, to $18.20.

Freddie Mac’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) were up 7 cents, or 0.73%, to $9.70. It was the most voluminous issue at mid-morning but sidestepped to Fannie’s series S preferreds in overall total volume.

On the day, more than 1.3 million of the securities traded.

Rounding out the GSE’s were Freddie’s 6.55% noncumulative preferreds (OTCBB: FMCKI), which were up 28 cents, or 3.26%, to $8.88.

Vanguard goes down

Elsewhere in the secondary market, Vanguard Natural Resources LLC continued to fall for the third-straight session in the wake of its bankruptcy announcement late last week.

The 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) were down 54 cents, or 19.64%, to $2.21.

And the 7.75% series C cumulative redeemable preferred units (Nasdaq: VNRCP) fell 74 cents, or 24.34%, to $2.30.

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