Preferreds end week with positive tone; secondary eyed; Citigroup up; Fannie, Freddie dip

By Stephanie N. Rotondo

Phoenix, June 14 - The preferred stock market was seeing "a nice rally in the secondary; there's just not a lot of volume," a trader said on Friday.

Investors were focusing on the secondary over the primary, he noted, given that there were "maybe some better buys on secondary stuff" based on current yields.

He added that many recently priced issues were trading at discounts.

One of the most actively traded secondary issues at midday was Citigroup Inc.'s 6.45% trust preferreds (NYSE: CPW). Late Thursday, the bank said it was calling $954 million of the securities on July 15.

The paper was trading at $24.45, up 32 cents, or 1.26%, at midday. By the close, the issue had come back in slightly, ending up 31 cents, or 1.23%, at $25.44.

The call price is equal to par plus 6.71875 cents of accumulated and unpaid dividends.

Fannie, Freddie soften

Though it was a positive day in the preferred space, Fannie Mae and Freddie Mac securities were among the few losers in the market.

Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) fell 18 cents, or 3.4%, to $5.12. Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) meantime dropped 14 cents, or 2.66%, to $5.13, while the 8.25% series T noncumulative preferreds (OTCBB: FNMAT) declined 32 cents, or 4.26%, to $7.20.

Fannie and Freddie have gyrated a lot of late as investors ponder whether or not there will be any recovery in the event the government - which currently controls the two mortgage giants - decides to liquidate. One group of shareholders has banded together, filing a lawsuit against the government in which they allege the 2008 takeover of the companies was illegal and a violation of property rights.

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