Morning Commentary: Fannie Mae, Freddie Mac continue recovery; Qwest $25-par notes trade higher

By Christine Van Dusen

Atlanta, Oct. 6 – Fannie Mae and Freddie Mac preferred stock continued to rebound and Qwest Corp. traded up during a mostly quiet start for the market.

“The secondary market is trading flat,” a trader said. “No real outflows, no inflows. We’re really not seeing money move around enough, so there’s no reason for preferreds to move.”

Still, Fannie Mae and Freddie Mac paper recovered on Monday, following major losses last week on the news that a federal judge had dismissed lawsuits alleging it was illegal for the mortgage companies to give profits to the government.

“They stabilized on Friday,” the trader said. “They’ve been jumping around a little bit, with the common stock trading up from lows. But the preferreds have kind of settled in.”

Meanwhile, Qwest’s $500 million issue of 6.875% $25-par senior notes due 2054 (NYSE: CTV) – which priced Sept. 22 – lifted to $24.70 on Monday morning, following Friday’s close of $24.59.

“The deal got into some weak hands, sold off a bit, but was actually trading much cheaper than other Qwest paper,” the trader said. “Now it’s just coming back to where it should have been.”

In other trading of preferreds on Monday, Duke Realty Corp.’s 6.5% depository shares, series K, cumulative preferred shares moved up 8 cents to $25.23 on 114,434 shares traded.

Royal Bank of Scotland’s 5.75% noncumulative dollar preference shares, series L ADR, rose 9 cents to $23.25 on 37,188 shares traded.

And Barclays Bank plc’s 8.125% non-cumulative callable dollar preference shares, series 5 ADR, ticked up 4 cents to $25.86 on 29,135 shares traded Monday morning.

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