Midday Commentary: Fannie, Freddie gain as regulator eases requirements; Entergy Texas plans deal

By Stephanie N. Rotondo

Phoenix, May 13 - Fannie Mae and Freddie Mac preferreds were getting a boost on Tuesday as the regulator overseeing the agencies laid out new policies aimed at easing the mortgage markets.

Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) rose 11 cents, or 1%, to $11.09 in early trading. Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) was up hugely at mid-morning, rising 42 cents, or 4.02%, to $10.87.

In his first speech since taking over the position of Federal Housing Finance Agency director, Mel Watt said that the mortgage guarantors would not impose a time restriction on when banks must buy back faulty loans. Watt also said the agencies intend to relax mortgage payment history requirements.

Meanwhile, deals continued to be added to the primary pipeline. Entergy Texas Inc. announced an offering of $25-par first mortgage bonds due 2064 early in the session.

Price talk is around 5.75%, according to a market source.

A trader pegged the issue at $24.95 bid, par offered in the mid-morning gray market.

Morgan Stanley & Co. LLC, BofA Merrill Lynch and Wells Fargo Securities LLC are the joint bookrunning managers.

The company plans to use proceeds to redeem debt bearing a higher interest rate.

Overall, the preferred market was on the firm side.

The Wells Fargo Hybrid and Preferred Securities index was up 9 basis points as of mid-morning.

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