U.S. election weighs on preferred stocks; recently priced deals trade off; Freddie rises

By Stephanie N. Rotondo

Seattle, Nov. 2 – A preferred stock trader said there was a “continued sell-off in our market” in midweek trading.

“I think people are nervous with this election,” he said, “so they want to go to cash.”

Given that, he expects the market will remain subdued until after the results of the Nov. 8 U.S. general election are in. In the meantime, investors focused on new economic data and the Federal Reserve, which, as expected, kept interest rates steady.

The Wells Fargo Hybrid and Preferred Securities index declined 30 basis points.

As the market was selling off, recently priced deals were also under pressure.

Hersha Hospitality Trust’s $100 million of 6.5% series E cumulative redeemable preferreds were seen offered at $24.82 at mid-morning.

The preferreds had closed at $24.82 bid, $24.92 offered on Tuesday.

The deal came Tuesday, upsized from $75 million and at the tight end of the 6.5% to 6.625% price talk.

Meanwhile, AXIS Capital Holdings Ltd.’s $550 million of 5.5% series E noncumulative preferreds – a deal priced Monday – were seen at $24.75 early in the day. At the bell, the issue was at $24.77, down a dime.

The preferreds were again dominating trading, with 1.47 million shares being exchanged.

On Tuesday, the deal began trading under a temporary ticker, “AXHHF.”

Freddie Mac firms

Freddie Mac’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) bucked the day’s downward trend, as investors viewed the GSE’s earnings positively.

The preferreds rose 6 cents, or 1.58%, to $3.86.

The issue was among the day’s most actively traded securities, with nearly 909,000 shares exchanged.

The mortgage giant reported a third-quarter profit of $2.3 billion on Tuesday, which compared to the agency’s $475 million loss the year before.

The improved results were attributed to fewer delinquent mortgages, as well as stabilizing mortgage interest rates.

Freddie Mac also said that fees from lenders rose to $133 million from $9 million in the second quarter.

Of the profits, Freddie Mac will pay all of that amount to the Treasury Department via a dividend payment. Once paid, Freddie will have made $101.4 billion in dividends to the government – above the $71 billion received in the 2008 bailout.

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