Preferred stock pipeline goes dry as market rebounds; Fannie, Freddie in focus, weaker

By Stephanie N. Rotondo

Phoenix, Oct. 8 – Preferred stocks finished the midweek session on a high note after being on the flat side for most of the day.

“The market was flat until about 1 p.m.,” a market source said. “Then it moved up in the afternoon... on expected [Federal Reserve] concerns about weakness in the global economy.”

The Wells Fargo Hybrid and Preferred Securities index closed up 26 basis points. The index was up a couple basis points shortly after the market opened, but by mid-morning, it was settling back to unchanged from Tuesday’s levels.

The Fed releases minutes from its September meeting, which showed that the central bank was not in any rush to raise interest rates – due in part to concerns about the global economy, which is showing signs of slowing down.

But as investors waited to see what the minutes had to say, activity in the preferred realm was “very light,” a source said.

“There’s not all that much going on,” a trader said. “There’s been no mention of any new deals, and everything is listed for the most part.”

There did continue to be weakness in Fannie Mae and Freddie Mac paper, however. The preferreds have been trending toward the downside since Sept. 30, when a federal judge dismissed investors’ lawsuits claiming the government’s consignment of a majority of profits was illegal.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) traded down a nickel, or 1.47%, to $3.35. Freddie’s fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) declined 16 cents, or 4.55%, to $3.36.

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