Midday Commentary: Kemper's $25-par notes free to trade; Arbor fizzles; Fannie Mae posts earnings

By Stephanie N. Rotondo

Phoenix, Feb. 21 - The preferred stock market was strong on Friday, shaking off a 5.1% decline in home sales in January.

The Wells Fargo Hybrid and Preferred Securities index was up 14 basis points at midday.

Kemper Corp.'s $150 million of 7.375% $25-par subordinated debentures due 2054 freed to trade early Friday after pricing on Thursday, according to a trader.

The trader saw the issue already trading north of par, quoting the notes at $25.10 bid, $25.15 offered.

"It's a small-cap insurance company, but it's a good local name with a decent coupon," he said.

He also noted that there was "some appetite for it," given that the market hasn't seen many non-financial deals so far this year.

"There was definitely demand for it," he said.

As for Arbor Realty Trust Inc.'s $22.5 million of 8.5% series C cumulative redeemable preferreds, the trader said he still hadn't seen any markets for the new issue.

"They've fallen a bit out of favor," he said, referring to the broader mortgage-backed securities-focused real estate investment trusts. Issuance from those companies was high in 2012 through early 2013, he said, but once the Federal Reserve started talking about tapering its stimulus program, investors got a bit skittish.

"They are highly leveraged. People are worried they can get crushed like a grape," he said. Most of what Arbor sold "probably went into retail accounts."

Meanwhile, Fannie Mae reported earnings on Friday. While the numbers were once again good, a trader said he was surprised he hadn't seen more of an uptick in the mortgage giant's preferreds.

Fannie posted its eighth consecutive quarterly profit, seeing net income of $6.5 billion for the fourth quarter of 2013.

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