Preferred stocks see strong kick-off to 2017; GSEs active; Vanguard, Legacy rise with oil prices

By Stephanie N. Rotondo

Seattle, Jan. 3 – The preferred stock market had a firm tone as 2017 began, though on “light volumes,” a trader said.

The trader attributed the limited liquidity to it being the first real day back from the holidays.

The trader also remarked that the market would likely be “keeping an eye on the next 17 days,” looking for direction from the incoming administration and “what Congress has in store.”

There was also little in the way of preferred-specific news. But with bank earnings expected to start next week, things could pick up.

A trader said there would not be any new issues out of the banking sector ahead of earnings but added: “We may see a couple [business development companies].”

The Wells Fargo Hybrid and Preferred Securities Index closed 67 basis points higher. The index was up 26 bps at mid-morning.

As for the day’s dealings, Fannie Mae and Freddie Mac were among the day’s most active issues – though less active than they have been in the last couple of months.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) traded off 15 cents, or 1.88%, to $7.85. Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ), however, were up 13 cents, or 1.72%, at $7.62.

There was no fresh news to act as a catalyst, but the market will be keeping an eye on the GSEs this year – especially as the incoming administration has indicated a desire to move quickly on housing reform.

Meanwhile, oil and gas names were up for the session, following the day’s initial gains in crude oil prices. While crude eventually settled at a two-week low – due to a strengthening dollar – oil-linked preferreds held on to their gains.

Vanguard Natural Resources LLC’s 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) finished up 13 cents, or 4.81%, at $2.83. Legacy Reserves LP’s 8% series B cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) firmed 95 cents, or 11.96%, to $8.89.

The early upward move in oil came as domestic crude prices improved over 2% on hopes a production cut agreement from OPEC and a few non-OPEC oil producers would serve to slash a global oversupply of the commodity.

The output cut went into effect on Jan. 1.

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