Preferreds rise as economy seen improving; Fannie, Freddie up; RBS shares drive higher

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 and continued to rise throughout the day, ending up 39 bps.

"The market was up a lot and it was a pretty steady progression," a market source said. He opined that the economic data combined with a gain in Treasuries was behind the upward move.

"The stock market was mixed, so that didn't hurt anything either," he said.

"Liquidity was pretty decent, even backing out Fannie and Freddie."

Still, 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 said 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) closed up 2 cents at $10.20. Over 23.2 million shares changed hands.

Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up 3 cents at $10.03 early in the day but finished off a penny at $9.99. The 8.25% series T noncumulative preferreds (OTCBB: FNMAT) were meantime up 15 cents, or 1.36%, at $11.20.

RBS pushes higher

Royal Bank of Scotland Group plc saw its preferreds moving higher with the market on Thursday. A market source said word that the company would consider a takeover offer for its U.S. unit, Citizens Bank, was playing a role in those gains.

The 6.4% series M noncumulative dollar preference shares (NYSE: RBSPM) closed up 45 cents at $25.48, and the 7.25% series T noncumulative dollar preference shares (NYSE: RBSPT) put on 13 cents to end at $24.94.

In an interview with Bloomberg earlier in the week, the head of Rhode Island-based RBS Citizens Financial Group Inc., Bruce Van Suan, said that the parent organization would be open to takeover offers for the unit, even as the company is moving ahead with plans for an initial public offering later this year.

On Monday, RBS said it was selling almost 100 Chicago-based branches of the U.S. unit to U.S. Bancorp. That sale is part of the overall effort to either get the IPO done or to get a sale of the entire unit done.

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