Morning Commentary: Preferred stock trading thin as summer nears end; Fannie, Freddie lose ground

By Stephanie N. Rotondo

Seattle, Aug. 24 – The preferred stock market continued to be on the subdued side as the summer months wound down, according to a trader on Wednesday.

The trader noted that the primary space also remained quiet.

Fannie Mae and Freddie Mac preferreds were trading off “modestly,” a trader reported, following a court ruling that said “shareholders don’t have the right to inspect [the GSEs’] books.”

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were down 20 cents, or 4.64%, at $4.11. Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) were off 12 cents, or 2.91%, at $4.01.

The court ruling contends that under the Housing and Economic Recovery Act of 2008 – the law under which the government took the mortgage giants into conservatorship – shareholders “gave up that right to the [Federal Housing Finance Agency],” the trader said.

“In the end, [the market is saying] that it hurts other shareholder lawsuits on the [net worth sweep] because it reinforces that the government can do whatever they want under HERA,” the trader remarked.

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