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Morning Commentary: Fannie, Freddie continue to move higher; JPMorgan results beat estimates
By Stephanie N. Rotondo
Seattle, April 13 – A preferred stock trader said Fannie Mae and Freddie Mac paper was “moving more” in midweek trading.
On Tuesday, the preferreds got a pop as the market digested a slew of new unsealed documents related to a court case stemming from the government’s 2012 decision to commandeer a majority of the GSEs’ profits. The gains continued into Wednesday, and the mortgage giants were dominating overall trading.
Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up 18 cents, or 4.24%, at $4.43 at mid-morning, with over 1 million preferreds being exchanged. Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) meantime ticked up 16 cents, or 3.82%, to $4.35, on just shy of 1 million trades.
The documents, which were unsealed by judge Margaret Sweeney of Federal Claims Court, appear to hold up the plaintiffs’ allegations that the government knew the agencies were returning to profitability before it made its decision to sweep profits. The sweep was predicated on the notion that the government needed to protect taxpayers in case of a need for another bailout.
Away from the GSEs, JPMorgan Chase & Co. kicked off bank earnings season on Wednesday with results that mostly beat expectations.
While the preferreds were reacting positively to the quarterly report, they were doing so on limited volume.
The 5.45% series P noncumulative preferreds (NYSE: JPMPA) were up 6 cents at $25.40.
For the first quarter, JPMorgan reported earnings per share of $1.35 on revenue of $24.08 billion. Analysts polled by Bloomberg had predicted EPS of $1.24 on revenue of $23.8 billion.
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