Morning Commentary: Preferred stock market begins week with firm tone; no new issues seen

By Stephanie N. Rotondo

Phoenix, Oct. 20 – Preferred stocks were churning higher in Friday trading, though amid limited volume.

“Generally speaking, everything is really muted,” a trader said. “High yield is just slightly higher.”

The Wells Fargo Hybrid and Preferred Securities index was up 28 basis points at mid-morning.

In the primary, the trader said there was “no word as far as new issues on the docket,” extending the recent trend that was made worse by a heavy sell-off last week.

As to the secondary space, Fannie Mae and Freddie Mac preferreds were up 10 cents to 20 cents early in the session, albeit in less-than-usual volume. The gains were coming ahead of an announcement from the Federal Housing Finance Agency – the regulator of the agencies – at the annual Mortgage Bankers Conference in Las Vegas, which is expected to clarify when banks will be required to repurchase bad loans.

The FHFA is also expected to explain a new agreement with Fannie and Freddie that lays out standards for lending to those with less-than-perfect credit scores. Banks have been hesitant to open their coffers to that group, especially without a clear indication of when they might have to buy those loans back.

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