Morning Commentary: Preferreds edge lower, but signs of improvement seen; Fannie, Freddie up

By Stephanie N. Rotondo

Seattle, Nov. 11 – A preferred stock trader said there was “a good flurry” in early Friday trading, as the market looks to “sift through the ashes and see what looks good to keep.”

The Wells Fargo Hybrid and Preferred Securities index was off 22 basis points at mid-morning. It fell 168 bps on Thursday and about half that amount on Wednesday in the wake of the U.S. election results.

A trader said the market was “bouncing around” as investors try to figure out how to position themselves ahead of a Trump presidency.

Fannie Mae and Freddie Mac were continuing their upward move. The agencies’ preferreds have been a major outlier in the market the last two days, on hopes that the president-elect would allow the GSEs to recapitalize, thereby reducing taxpayer risk.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up 60 cents, or 12%, at mid-morning, trading at $5.60. Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) were up 40 cents, or 8.16%, at $5.30.

Some bank preferreds were meantime rallying a bit as well.

JPMorgan Chase & Co.’s 6.15% series BB noncumulative preferreds (NYSE: JPMPH) were up 2 cents at mid-morning, at $25.41. In Bank of America Corp. paper, the 6.2% series CC noncumulative preferreds (NYSE: BACPC) added 20 cents to $25.26.

The BofA 6% series EE noncumulative preferreds (NYSE: BACPA) were 5 cents higher at $25.08.

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