Preferred action comes at end of session, though GSEs weigh down again; Chimera trades up

By Colin Hanner

Chicago, Feb. 23 – The preferred stock market was firm on Thursday, with a bulk of the upward action occurring in the 30 minutes prior to the session close, a market source said.

Other than Fannie Mae and Freddie Mac issues, “everything else was pretty green” on the session, the market source said.

The Wells Fargo Hybrid and Preferred Securities index was up 31 basis points at the end of the session, a near-fourfold rise since mid-morning. The U.S. iShares Preferred Stock index was up 36 bps.

The sudden spike in activity at the end of the day may have been correlated to long-term Treasury bonds, though “we’re always a little hesitant because we really don’t follow Treasuries,” the market source said.

Nonetheless, several issues traded in the green, including Chimera Investment Corp.’s recently priced $300 million sale of 8% series B fixed-to-floating rate cumulative redeemable preferreds, which were up 3 cents from mid-morning to $24.83, a market source said.

Chatter surrounding a new deal from Viacom, Inc. during mid-morning trading priced Thursday in the form of junior subordinated debentures.

In the secondary space, government-sponsored enterprises continued to steal the bulk of attention in the preferred space.

After Tuesday’s session, which saw the U.S. Court of Appeals for the D.C. Circuit ruling against plaintiffs in a Perry Capital LLC v Mnuchin case that did not appeal to shareholders, GSE’s were down nearly 30%, followed by a near-10% loss on Wednesday’s session.

Thursday brought about more losses for Fannie and Freddie, but a market source said “you’re more like 2-2½% down on more active trades.”

“It’s probably reaching some sort of equilibrium,” the source said.

Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) were down 17 cents, or 2.49%, to $6.65.

Fannie’s series O variable-rate noncumulative preferreds (OTCBB: FNMFN) were down 31 cents, or 2.44%, to $12.39.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were down 7 cents, or 0.98%, to $7.07.

Bucking the trend were Fannie’s 7.625% series R noncumulative preferreds (OTCBB: FNMAJ), which were up 23 cents, or 3.43%, to $6.94.

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