Preferreds lose most of midweek gains; Fannie, Freddie bounce; Inland planning new issue

By Stephanie N. Rotondo

Phoenix, Oct. 9 – It continued to be subdued in the preferred stock market Thursday, even following a new jobs number that showed jobless claims falling to an eight-year low on average.

“It’s been a very boring week,” a trader said. “A lot of stuff went ex-dividend, but there’s just nothing [going on].”

The Wells Fargo Hybrid and Preferred Securities index erased nearly all of the 26 basis points earned on Wednesday, closing Thursday off 18 bps. But the straight equities were also off, as fears of the global economy took away all the gains seen in midweek trading after the Federal Reserve said it was in no rush to raise interest rates.

“There was not a lot of volume out there today,” a market source said. “The market seems a little under the weather.”

Activity in Fannie Mae and Freddie Mac preferreds seemed to be leveling out, even as the agencies’ paper was “bouncing back a little bit,” according to a trader.

However, the agencies’ preferreds were the most actively traded securities on the day of paying and non-paying preferred shares.

The trader said the upward moves came on the heels of reports indicating that it doesn’t matter who wins the next presidential election – neither side wants the government to act as a mortgage insurer, meaning a wind-down of some sort is still likely in the cards.

However, it could take several more years to iron that out.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up a nickel, or 1.49%, at $3.40. Freddie’s fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were up 6 cents, or 1.70%, to $3.42.

Inland to price preferreds

With bank earnings slated to begin next week, a market source said “the door is closed” on new issuance.

“Issuance may pick up [after earnings come out], it usually does,” he said. However, he speculated that the amount of new deals hitting the pipeline could be less than that seen in the last two quarters.

Some deals, however, may trickle out ahead of earnings.

Around midday, Inland Real Estate Corp. said it was offering series B cumulative redeemable perpetual preferred stock via bookrunner Wells Fargo Securities LLC.

Price talk is in the 7% area, according to a trader.

The new issue is expected to price Friday morning, a market source reported.

Shortly after the deal was announced, a trader said he was seeing a $24.60 bid for the paper.

But another source said it was a “small deal” and non-rated to boot.

“It seemed to be at a price that was really aggressive for a non-rated REIT,” the source said, adding that as such, he hadn’t been following it at all.

The company will apply to list the new securities on the New York Stock Exchange under the ticker symbol “IRCPB.”

Proceeds will be used to purchase additional properties and for general corporate purposes, which may include the repayment of amounts outstanding under an unsecured line of credit facility maturing Aug. 22, 2017.

Inland is an Oak Brook, Ill.-based real estate investment trust focused on the Midwest markets.

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