Preferreds gyrate as Yellen speaks to Congress; Just Energy lists; Fannie, Freddie improve

By Stephanie N. Rotondo

Seattle, Feb. 14 – The preferred stock market swung from negative to a touch positive on Tuesday as the market reacted to testimony given by Federal Reserve chairman Janet Yellen before the Senate Banking Committee.

In her testimony, Yellen said that it would be “unwise” to wait too long to further increase interest rates.

“Waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession,” Yellen said.

Whether or not rates will rise in March is still up in the air.

One market source noted that there were “mixed messages” in regards to banking regulations, as Yellen promoted the idea that regulations needed to be eased for smaller community banks.

“I don’t think it lent any clarity,” the source said.

The Wells Fargo Hybrid and Preferred Securities index ended up 4 basis points, though it was down 7 bps at mid-morning. The U.S. iShares Preferred Stock index finished flat after being down 13 bps earlier.

In preferred stock-specific news, Just Energy Group Inc.’s $100 million 8.5% series A fixed-to-floating rate cumulative redeemable perpetual preferred stock listed on the New York Stock Exchange on Tuesday.

The ticker symbol is “JEPrA.”

The deal priced Jan. 30 via Stifel Nicolaus & Co. Inc., FBR Capital Markets and National Bank Financial Inc.

The paper closed the session at $24.87, down from $25.10 at the open.

Meanwhile, Fannie Mae and Freddie Mac paper remained busy. The paper was trending upward, as the market prepares for the GSEs to release their latest quarterly results later in the week.

A source also speculated that the gains could be due to the confirmation of Steven Mnuchin as Treasury Secretary.

Morgan Stanley & Co. Inc. was also on the active side. Its 5.85% series K fixed-to-floating rate noncumulative preferreds (NYSE: MSPrK) were initially off 5.58 cents to $25.5242, though, like the broader market, it recovered to end unchanged at $25.585.

Another boost for GSEs

A market source commented that Fannie and Freddie were “all up about 1%” in Tuesday trading.

He was not sure what was causing the gains, though he noted that the market continues to appear positive about Mnuchin, the newly confirmed Treasury Secretary who has said GSE reform is a top priority.

The source was not convinced that Mnuchin was going to be good for shareholders – or preferred holders, for that matter – given that he has said there is no guarantee stakeholders will recoup their investments.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS), however, continued to climb upward, rising 11 cents, or 1.03%, to $10.81. The variable rate series O noncumulative preferreds (OTCBB: FNMFN) meantime added 20 cents, or 1.06%, to close at $19.00.

Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) firmed 9 cents to $10.28.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.