Public Storage's 6.375% preferreds free to trade; Fannie, Freddie preferreds weaken

By Stephanie N. Rotondo

Phoenix, March 11 - Preferred stocks were again tilting toward the softer side during early Tuesday trading but eventually reversed course to end slightly firmer.

The Wells Fargo Hybrid and Preferred Securities index was trading off 3 basis points as of mid-morning but closed up 5 bps.

In the primary, Public Storage Inc.'s $225 million of 6.375% series Y cumulative preferreds - a deal that priced late Monday - was seen bid for at $24.70 by one trader around mid-morning.

Another market source said the issue freed to trade around noon ET, at which point the paper was quoted at $24.77 bid, $24.85 offered.

No other new deals were announced Tuesday.

In the secondary, Fannie Mae and Freddie Mac preferreds were "running like crazy," according to a trader.

The gains have been propelled by chatter about the GSEs and their potential to bring in nearly $180 billion for taxpayers over the next 10 years if the government chooses to reform the agencies instead of winding them down.

On Tuesday, senators released details about a bill that would in fact wind-down the pair of mortgage giants. However, a trader said there was only a small chance that the bill would actually come to the floor and that it was more than likely "political wrangling" ahead of elections.

Looking forward, a trader noted that Wednesday might see some increased activity, given that it was a "big ex-dividend date."

Fannie, Freddie tumble

Fannie Mae and Freddie Mac preferreds initially turned upward on word that a bipartisan Senate group was putting forward a plan to wind down the agencies.

However, as the news was digested, the "market finally got their cup of wake up coffee," a market source said, and the preferreds began to get hit.

The source said there was "high, high volume" in the agencies' preferred shares, which ended the session down 7% to 8.5% on average.

"The rhetoric with [the new proposed legislation] is that there is more bipartisan support [than the previous plans put forth]," the source said. He said that support increased the probability that the plan could get approved, though he would not go so far as to say it was "probable."

Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) ended the day off 50 cents, or 3.92%, at $12.25. Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) lost 40 cents, or 3.25%, closing at $11.90.

Vanguard, CHS to list

Vanguard Natural Resources LLC's $175 million of 7.625% series B cumulative redeemable perpetual preferred stock units and CHS Inc.'s $365.22 million of 7.1% series 2, class B cumulative redeemable perpetual preferreds are expected to list on the Nasdaq Global Select Market on Wednesday.

The Vanguard deal - which priced March 4 - will be listed under "VNRBP." CHS - which came March 5 - will be under "CHSCN."

Around midday, a trader quoted Vanguard at $24.65 bid, $24.75 offered and CHS at $25.50 bid, $25.65 offered. At the close, a source said Vanguard was off 6 cents at $24.66.

As for CHS, the source said the securities ended up 18 cents at $25.55, though he speculated that the number was "massaged." He noted that the volume weighted average price was $25.605.

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