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Morning Commentary: Preferreds see continued upward momentum; Fannie, Freddie stabilize
By Stephanie N. Rotondo
Seattle, Dec. 17 – There was “general strength back in the preferred market,” a trader said Thursday.
The preferred stock market got hammered on Monday, dropping 1.65%. Since then, the market has been clawing its way “almost back to where we were Friday,” the trader said.
The Wells Fargo Hybrid and Preferred Securities index was up 32 basis points at mid-morning.
News Wednesday that the Federal Reserve had opted to raise interest rates by 0.25% for the first time since 2006 did not appear to be an obstacle in trading, nor was ongoing commodity price declines.
“Even with oil being off, even [oil and gas-linked preferreds] are rebounding too,” the trader said.
However, he noted that on those issues “the markets are super wide though.”
Meanwhile, Fannie Mae and Freddie Mac preferreds continued to dominate trading. Early Thursday, the GSE paper was unchanged to slightly better, possibly indicating that there is an end to a recent sell-off in the issues.
Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up a penny at mid-morning, trading at $3.45. Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were unchanged at $3.45.
This week, Congress agreed to a spending and tax bill that included a provision on the mortgage agencies. The provision prohibited the Treasury from a “recap and release” of the companies, which would have sent them into private hands until 2018.
The Treasury had fought against such a move, though shareholders were pushing for such a plan as they fight against the 2012 “net worth sweep” imposed by the government.
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