Morning Commentary: Preferreds soft going into month-end; budget deal ‘good’ for Freddie, Fannie

By Stephanie N. Rotondo

Seattle, Oct. 30 – Preferred stocks were trading lower early Friday, though one trader deemed the market “pretty flat.”

The Wells Fargo Hybrid and Preferred Securities Index was down 4 basis points at mid-morning.

The trader noted that the federal government had passed a budget deal that would avoid any government defaults for the next two years. Had Congress failed to reach a deal, a government shutdown would have gone into effect on Nov. 3.

The trader further noted that Sen. Bob Corker had tried to include a provision in the bill “to prevent the Treasury from selling Freddie and Fannie preferreds without Congressional approval.” However, the provision was not included, “which is good” for the GSE paper.

But as of early trades, there was not a lot of reaction in the preferreds.

Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were flat at $4.75, while Freddie Mac’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were up 4 cents, also at $4.75.

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