Morning Commentary: Preferreds stay firm as Dow jumps 250 points; primary space remains quiet

By Stephanie N. Rotondo

Phoenix, Jan. 8 – Preferred stocks were “drifting up a little,” a trader said Thursday.

The Wells Fargo Hybrid and Preferred Securities index was up 10 basis points at mid-morning. By comparison, the Dow Jones industrial average was up about 250 points.

Though the preferred arena has been ticking higher for most of the week, the primary space has remained silent.

“I’m still hopeful the calendar could pick up,” a trader said, noting the fresh headlines indicating that Banco Santander needs more capital. “But right now, I’m not hearing anything.”

In the secondary market, Fannie Mae and Freddie Mac paper was on the rise as investors await a speech on housing from president Barack Obama.

The speech is slated for Thursday from Phoenix. Investors will be looking at the kind of language Obama uses to see if they can discern his plans for government-sponsored entities going forward.

As previously reported, Keefe, Bruyette & Woods said in a research note published Monday that if he does not mention any specific housing reform bills currently being passed around – or forgoes mentioning the topic at all – it could indicate that Obama is abandoning his push to wind down the mortgage giants.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up 11 cents, or 2.76%, at $4.10. Freddie’s fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were up 12 cents, or 3%, at $4.12.

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