Midday Commentary: Preferreds rise as economy shows signs of improvement; Fannie, Freddie up

By Stephanie N. Rotondo

Phoenix, Jan. 9 - Preferred stocks ticked up on Thursday as a new jobs report indicated that "maybe the economy is a little better," a trader said.

On top of the improving economic data, the trader noted that the preferred space was "way oversold last month." With investors "still reaching for income," they could be coming into preferreds as they are "still the cheapest out here."

The Wells Fargo Hybrid and Preferred Securities index was up 15 basis points at mid-morning.

Fannie Mae and Freddie Mac preferreds were seeing some follow-through after Wednesday's run up. A trader said comments made at the Financial Services Roundtable on Wednesday indicated that the government and the agencies' preferred holders were working on a compromise that could give holders some recovery.

"That's why they rallied so strongly yesterday," he said.

Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were up 2 cents in early trading at $10.20. Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up 3 cents at $10.03.

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