Preferreds tick up amid limited liquidity; RAIT notes firm; Fannie Mae cuts housing view

By Stephanie N. Rotondo

Phoenix, Aug. 18 – It was quiet in the preferred stock market as Monday’s session got underway, a trader reported.

“The long bond is off,” he noted, adding that the dip wasn’t really news driven given that it was a muted weekend, aside from ongoing rioting near St. Louis.

The Wells Fargo Hybrid and Preferred Securities index was up 19 basis points at mid-morning and climbed all the way up to end 30 bps firmer.

The trader said he had not heard of any new deals for the week, though he remarked that there were “a lot of filings last week.” As such, that could mean the primary will continue to churn out smaller, unrated deals as it did in the previous week.

Case in point: Red Mountain Resources Inc. said last week that it was planning a sale of 10% series A cumulative redeemable preferred stock via Northland Capital Markets and Euro Pacific Capital. On Monday, the Dallas-based energy company announced that it would hold a conference call on Tuesday to discuss the sale.

From last week’s business, RAIT Financial Trust’s $70 million of 7.125% $25-par notes due 2019 were holding around $24.75.

The deal came Aug. 11 and has yet to receive a temporary reporting symbol, the trader said.

Fannie adjusts outlook

A trader said there was news out regarding Fannie Mae and Freddie Mac but that the agencies’ preferreds were “not moving around much.”

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) closed up 8 cents to $11.35, while Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) fell 3 cents to $11.84. Liquidity in either issue was limited, as it was in the rest of the overall preferred space.

On Monday, Fannie reduced its housing market outlook for 2014 and 2015, noting that inclement weather combined with consumer “conservatism” had already pressured the space during the first half of 2014.

The agency also noted that it did not expect 2015 to be the “breakout year” that many are hoping for, though it is probable that it will be better than 2014 or 2013.

However, Fannie’s outlook was at odds with the latest reading of the National Association of Homebuilders/Wells Fargo Housing Market index, which increased in August to 55 from 53 in July. The rise was the third straight gain the index has seen.

Analysts polled by Reuters had been expecting the index to hold at 53.

But that hasn’t been the only news for Fannie and Freddie. On Friday, it was reported that Pershing Square had thrown its hat into the litigation ring, suing the government for its takeover of both companies’ profits. Pershing isn’t the only one to contest the amended bailout agreement – at least 20 other investor-lawsuits are pending, all aimed at similar issues relating to the 2012 change that required Fannie and Freddie to hand over a bulk of their quarterly profits as dividends.

However, Pershing’s lawsuit focuses on common stock investors, while most of the other suits are aimed at aiding the preferred stockholders.

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