Midday Commentary: Preferreds trade soft; City National on tap; Fannie, Freddie active

By Stephanie N. Rotondo

Phoenix, Oct. 31 - The preferred stock market remained under pressure in Thursday trading as the Wells Fargo Hybrid and Preferred Securities index traded off 4 basis points.

Despite the weakness, City National Corp. said it was bringing a new issue of series D fixed-to-floating rate noncumulative preferred stock.

Price talk was 6.75% to 6.875%, according to a trader.

"So basically, it's the exact same [structure] that's been coming that's been popular," he said. He added that there was no selling group.

"It seems pretty restricted," he said. "I think they'll stick to a pretty small size."

He saw the issue at $24.88 bid in the gray market.

The trader also noted that "there was talk of a good-sized deal coming this week, and I don't know what happened to it."

The deal was thought to be coming from a big bank, but it "never materialized," he said. "It could have just been conjecture."

Secondary dealings were meantime deemed "pretty quiet," although the trader said that Fannie Mae and Freddie Mac issues continued to move around.

"They've been on the move for awhile," he said, adding that the securities were generally firm on Thursday. He said the recent movements were due to "speculation that [the government] is not going to be able to just dismantle them."

He remarked that there are "a large contingency of hedge funds that own a large chunk of [Fannie and Freddie] preferreds." As preferred holders have been suing to have their dividends turned back on - the government has currently placed a ban on paying out dividends except to itself due to the agencies' bailouts in 2008 - he opined that "maybe they have enough pull to get something done so they can finally get paid."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.