Morning Commentary: Preferreds less volatile than previous session; Fannie, Freddie remain firm

By Stephanie N. Rotondo

Phoenix, July 18 – Preferred stocks were “back to snoozeville” early Friday after a volatile session on Thursday, spurred in part by the crash of a Malaysian Airlines jet in Ukraine, according to a trader.

“Things aren’t moving around too much,” he said.

The Wells Fargo Hybrid and Preferred Securities Index was up 4 basis points at mid-morning. It ended down 30 bps on Thursday.

Fannie Mae and Freddie Mac paper continued to gain momentum, however. The mortgage backers have been making headlines this week, as yet another new bill to wind down the agencies was introduced by a trio of House Democrats and as a judge overseeing Fairholme Capital’s case against the government in regards to its conservatorship jumped a hurdle.

In regards to the legal action, the judge granted Fairholme a broader range in the discovery process. Fairholme is attempting to prove that the government’s actions in placing the firms under conservatorship were not lawful.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up 6 cents early in the day, trading at $11.14. Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) inched up 2 cents to $11.70.

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