Morning Commentary: Preferreds down with equities; Fannie, Freddie paper gives up recent gains

By Stephanie N. Rotondo

Phoenix, Sept. 1 – Preferred stocks were declining in early Tuesday trading as the market kicked off the first week of September.

The weakness was following the trend of the equity markets, which were being pressured yet again by concerns about China. This time, the worries were based on various purchasing managers index points that came in weaker than expected from the nation.

The Wells Fargo Hybrid and Preferred Securities index was off 14 basis points. By comparison, the Dow Jones industrial average was down 2.12% at mid-morning.

Given the market’s recent volatility, the primary space has been rather quiet.

“I heard of a deal,” a trader said. “But they’re not going to bring it amid the volatility.”

The trader also noted that activity would soon be winding down ahead of the long holiday weekend, which would likely contribute to the primary’s lack of calendar.

In the secondary market, Fannie Mae and Freddie Mac preferreds “pulled back,” according to a trader. The paper had improved on Monday following comments from analyst Dick Bove that opined a White House settlement was on the horizon. But a Wall Street Journal piece out later in the previous session indicated that such expectations are a pipe dream, given that the government has already had several victories as it fights off the GSEs’ shareholders.

Both Fannie and Freddie shares were down 10 to 15 cents in early trading.

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