Preferreds finish down with equities; Fannie, Freddie paper retreats; oil and gas drops

By Stephanie N. Rotondo

Phoenix, Sept. 1 – Preferred stocks were declining in 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 finished off 12 basis points. By comparison, the Dow Jones industrial average was down 2.84%.

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 a calendar.

In the secondary market, Fannie Mae and Freddie Mac preferreds “pulled back,” according to a trader.

The agency 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.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) ended off 15 cents, or 3.04%, at $4.78, effectively erasing nearly all of its Monday gains. Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) meantime dropped 21 cents, or 4.28%, to $4.70.

The latter issue gave back all of its previous gains and then some.

Oil shares give up gains

China concerns – as well as a U.S. manufacturing report that showed a contraction in August – were also weighing on crude oil prices, stemming the commodity’s recent gains.

For its part, West Texas Intermediate crude ended down nearly 9% on the day.

That news resulted in weakness among oil and gas preferreds.

Goodrich Petroleum Corp.’s 10% series C cumulative redeemable preferreds (NYSE: GDPPC) and 9.75% series D cumulative redeemable preferreds (NYSE: GDPPD) finished lower again, just one day after the company said it was cancelling its dividends.

The Cs closed down 36 cents, or 15.48%, at $1.965. The Ds ended off 53 cents, or 27.18%, at $1.42.

Meanwhile, Vanguard Natural Resources LLC’s 7.875% series A cumulative redeemable preferred units (Nasdaq: VNRAP) dropped 98 cents, or 4.44%, to $21.11, while the 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) declined 33 cents, or 1.85%, to $17.54.

Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) weakened 61 cents, or 4.16%, to $14.17, losing all of the ground gained in the previous session.

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