Morning Commentary: Preferred stock market activity dwindles ahead of holiday; Fannie, Freddie up

By Stephanie N. Rotondo

Phoenix, Sept. 3 – The preferred stock market was firm again early Thursday, but liquidity remained constrained going into the holiday weekend.

“I think once we get into September, we should probably see the calendar build up a little,” a trader said.

In the meantime, he speculated that the market would remain subdued for the rest of the week as desks empty early ahead of Labor Day.

The Wells Fargo Hybrid and Preferred Securities index was up 6 basis points at mid-morning.

Fannie Mae and Freddie Mac securities were moving up again during the session on chatter the GSEs “might start entertaining the idea of retaining capital,” a trader commented. The mortgage giants have had the bulk of the profits conscripted by the federal government under amended terms of its conservatorship agreement since 2013.

The profit-taking has resulted in a slew of shareholder lawsuits, most of which allege the government acted illegally in taking most of the agencies’ quarterly earnings.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up 4 cents in early trading at $5.04. Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferred stock (OTCBB: FMCKJ) was up 19 cents, or 3.89%, at $5.08.

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