Morning Commentary: GSEs eyed after Mnuchin interview; Chimera firm; Viacom bringing new deal

By Colin Hanner

Chicago, Feb. 23 – All eyes were on the comments of U.S. treasury secretary Steven Mnuchin on Thursday morning in the preferred space, a trader said, which he said could offer a clearer picture of government-sponsored enterprises and tax reform going forward.

Mnuchin talked about U.S. tax reform and the state of Fannie Mae and Freddie Mac, “so hopefully we get some clarity there so we start bringing more issues,” the trader said.

Those two GSEs were up in mid-morning trading.

The Wells Fargo Hybrid and Preferred Securities index was up 8 basis points at mid-morning, and U.S. iShares Preferred Stock index was up 22 bps.

Mnuchin, in an interview with CNBC, talked largely about a tax reform plan, painting a clearer picture for an otherwise murky and unknown subject.

“We are committed to passing tax reform; it will be very significant,” Mnuchin said. “It’s going to be focused on middle-income tax cuts, simplification and making the business tax cut competitive with the rest of the world.”

Mnuchin added that he hoped to get the reform passed by the time Congress leaves for recess in August.

In the primary market, Chimera Investment Corp.’s recently priced $300 million sale of 8% series B fixed-to-floating rate cumulative redeemable preferreds were trading with a $24.80 bid, $24.85 offer, similar to where they were trading on Wednesday, a trader said.

The trader added that Viacom, Inc. is bringing a $1,000-par issue on Thursday coming out of Morgan Stanley & Co. LLC, adding that he believes it to be a two-part deal that includes five- and 10-year non-callable 6% fixed-to-floating rate preferreds.

In the secondary arena, “people are getting a clearer picture of what this ruling was on Tuesday,” a trader said, referring to the U.S. Court of Appeals for the D.C. Circuit ruling against plaintiffs in the Perry Capital LLC v Mnuchin case that did not appeal to shareholders.

“Fannie and Freddie are bouncing back a bit,” after getting beat down the past two sessions, the trader said.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up 11 cents, or 1.54%, to $7.25 at mid-morning.

Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) were up 1 cent, or 0.15%, to $6.83.

And Chimera’s 8% series A cumulative redeemable preferreds (NYSE: CIMPrA) were up 8 cents, or 0.32%, to $25.20.

© 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.