Preferred stocks falter on Trump concerns; Fannie, Freddie lose ground; GasLog lists on NYSE

By Stephanie N. Rotondo

Seattle, May 17 – The preferred stock market followed the broader equity markets lower on Wednesday, albeit in modest trading.

“The market is very sleepy,” a trader commented.

The Wells Fargo Hybrid and Preferred Securities Index dropped 23 basis points for the day. The U.S. iShares Preferred Stock ETF declined 33 bps.

By comparison, the stock markets were down over 1% across the board, with the Nasdaq Composite Index leading the pack with a 2.57% fall. The weakness among common stocks was attributed to concerns regarding the viability of Trump’s presidency.

Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were “selling off a little bit with the Trump news,” a trader reported.

The preferreds lost 40 cents, or 5.59%, closing at $6.75. The issue was the top trading security of the day, though less than 500,000 of the preferreds were exchanged.

Freddie Mac’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) – which usually come runner-up to the Fannie issue – saw significantly less trading, with about 126,000 shares exchanged. However, like Fannie, the Freddie preferreds were under pressure, falling 41 cents, or 5.93%, to $6.50.

“The more trouble Trump gets himself into, the more unlikely it is he gets the important things done,” the trader said, such as GSE reform. Given the latest kerfuffle involving the firing of FBI director James Comey and the investigation of Russia’s ties to Trump and his people, the likelihood of GSE reform taking center stage any time soon seems remote.

The GSE-linked preferreds were recently on a tear, climbing ever higher on hopes that a plan for housing finance reform would soon be on the table. Steven Mnuchin, Treasury Secretary, has commented more than once that such an effort is a top priority to the administration, especially as the agencies near 2018 and are slated to have their capital buffers reduced to zero.

Meanwhile, GasLog Partners LP’s $143.75 million of 8.625% series A fixed-to-floating rate cumulative redeemable preference units began trading on the New York Stock Exchange on Wednesday, as expected.

The ticker symbol is “GLOPPrA.”

The newly-listed units ended the session at $25.30, which compared to $25.44 at the open.

The deal came to market on May 8.

Morgan Stanley & Co. LLC, UBS Securities LLC, Citigroup Global Markets Inc. and Stifel Nicolaus & Co. Inc. ran the books.

As for recent deals that have not yet listed, Capitala Finance Corp.’s 6% $25-par notes due 2022 were seen holding in a $25.05 to $25.15 context.

The $70 million issue priced on May 10, upsized from $50 million.

Ladenburg Thalmann & Co. Inc., BB&T Capital Markets, Janney Montgomery Scott LLC, William Blair & Co. LLC and Wunderlich Securities Inc. were the joint bookrunners.

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