Preferred market rises despite Japan’s recession news; American Realty preferreds weaken

By Stephanie N. Rotondo

Phoenix, Nov. 17 – Trading in preferred stocks was “light, but not too bad” as the week kicked off, a market source reported.

Despite the modest liquidity, the market was firmer during the session. The Wells Fargo Hybrid and Preferred Securities index closed up 19 basis points.

“I thought we would see more action in the [Treasury] bond market with Japan falling back into a recession,” a trader said. Bond market activity typically carries over into the preferred stock realm.

Looking forward for the week, the trader said that there have been “lots of shelf filings, so I wouldn’t be surprised if we see some new deals.”

However, he added that he had not heard of anything specific coming this week.

In the secondary realm, American Realty Capital Properties Inc.’s 6.7% series F cumulative redeemable preferred stock (Nasdaq: ARCPP) was again trading lower following a conference call the company held Friday.

The preferreds closed a penny weaker at $21.89.

During a shareholder and analyst call on Friday, the real estate investment trust said it had secured a waiver from lenders to delay filing its third-quarter results until January. The delay comes on the heels of accounting issues recently reported by the company.

It was also said during the call that David Kay, the company’s chief executive officer, will stay on with the company.

But the day’s dominating names were Fannie Mae and Freddie Mac. A market source said activity in some of the agencies’ issues was “very active.”

Freddie’s fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) fell a penny to $4.05. In Fannie paper, the 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) declined 12 cents to $4.08, while the 8.25% series T noncumulative preferreds (OTCBB: FNMAT) rose 13 cents, or 2.34%, to $5.69.

The source noted that there was recent news about Fairholme Fund and its announcement that it would no longer be disclosing its holdings in the government-sponsored entities. That came on the back of the fund cutting its common stock stake.

The fund is not required to disclose its preferred stock holdings.

However, in regards to the activity in the two names, the source said that “I doubt [that story] explains it.”

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