Belgium bombings result in gyrations for preferred stocks; calendar expected to ramp up

By Stephanie N. Rotondo

Seattle, March 22 – The preferred stock market was following the broader markets lower early Tuesday after a string of bombings hit Brussels, but the space had recovered by the closing bell.

The bombings – two of which occurred at the airport and another at a subway station, both during morning rush hour – were attributed to the recent arrest of Salah Abdeslam, a suspect in the massive attacks on Paris last year. The Islamic State claimed responsibility for the job.

The Wells Fargo Hybrid and Preferred Securities index ended up 10 basis points. The index was off 3 bps at mid-morning.

“Treasuries are up on that [news],” a trader said at midday. “It’s a flight to quality.”

The trader further opined that once the situation “settles down,” Treasuries could come back in.

As for the primary space, the deal flow remained nil on Tuesday, though a trader said he was “hearing there’s a busy calendar” next week.

As for recently priced deals that have not yet listed on their respective exchanges, Entergy New Orleans Inc.’s $110 million of 5.5% $25-par first mortgage bonds due 2066 “have really run up,” according to a trader, placing the issue at $25.70 bid, $25.87 offered.

At the close, the issue was seen at $25.30.

That issue priced March 15.

Huntington Bancshares Inc.’s $350 million of 6.25% series D noncumulative perpetual preferreds – a deal priced March 14 – were inching higher as well, trading in a $25.30 to $25.40 context, a trader said.

Another market source said the preferreds were again the most actively traded security.

And, KKR & Co. LP’s 6.75% series A noncumulative perpetual preferred units were pegged at $24.92 bid, par offered.

Fannie, Freddie mixed

Fannie Mae and Freddie Mac’s preferreds were on the busier side in an otherwise light volume day as the Federal Housing Finance Agency said it was still considering mortgage debt reduction for underwater borrowers.

“If they do, it could effect some REITs,” a trader speculated.

In trading, the GSEs’ preferreds were mixed.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were off 4 cents, or 1.29%, at $3.06. Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) inched up a penny to $3.09.

On Monday, The Wall Street Journal reported that the FHFA had approved a plan to reduce the principal amount on some underwater mortgages.

The Journal citied “people familiar with the matter.”

However, other news outlets picked up the story and when asking the FHFA for comment, it would only say that such an idea is “still under consideration.”

Democrats and housing advocates have been pushing for such moves, but thus far nothing has been done – in part because with Fannie and Freddie still under conservatorship, taxpayers could still be on the hook in case of another crisis.

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