Preferred stocks pull back, rebound by end of day; new deals weak; Fannie, Freddie falter

By Stephanie N. Rotondo

Phoenix, May 30 - After a busy midweek session, Thursday's preferred stock market was quieting down, according to one trader.

"Yesterday was very busy," the trader said. "Today it's quiet throughout. People are digesting yesterday, I guess."

However, by day's end, the market had managed to rebound, following the trend set by the equity markets.

The trader also noted that he had heard talk of a new deal during Thursday's session, "but that got snubbed out."

He was not sure of the identity of the potential issuer.

With the recent pull-back in Treasuries, many recently priced preferred deals were trading down at lower levels.

Entergy Arkansas Inc.'s $125 million of 4.75% $25-par notes due 2063, for example, were trading at $24.35 at midday.

"Other Entergy issues got hit too," a trader said, referring to the paper's reaction to the Treasury bond dip.

The Entergy Arkansas deal came on Tuesday.

National Retail Properties Inc.'s $250 million of 5.7% series E cumulative preferreds - a deal that came May 22 - were meantime seen at $24.85 bid, while New York Mortgage Trust Inc.'s $75 million of 7.75% series B cumulative redeemable preferreds were at $24.58 bid.

The New York Mortgage issue came Tuesday.

Fannie, Freddie softer

Fannie Mae and Freddie Mac preferreds remained weak on Thursday, following a big drop on Wednesday.

Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were down 21 cents, or 3.15%, at $6.25, while Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) declined by 26 cents, or 3.97%, to $6.29.

On Wednesday, the mortgage giants saw their preferred securities tank, though market sources said the declines were based on pure speculation and profit-taking.

Late Wednesday, it was reported that the Senate is looking to introduce a bill soon that would create one single entity to replace the government-backed firms. It is still not clear what that bill would contain or how it would wind-down the enterprises.

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