Preferred stocks move up; liquidity slips as fixed income closed; Fannie, Freddie climbing again

By Stephanie N. Rotondo

Phoenix, Oct. 13 – Preferred stocks were higher on Monday, albeit amid subdued activity.

While the equity markets were open on Monday, the fixed-income space was closed for Columbus Day. As such, many preferred stock players were taking advantage of the three-day weekend.

And the day’s firmness came even as the equity markets remained in retreat, with the S&P 500 index falling below the key 1,900 level.

The Wells Fargo Hybrid and Preferred Securities index ended 4 basis points better.

Fannie Mae and Freddie Mac preferred shares continued to regain ground despite the overall quiet tone of the day. The preferreds had started to climb back up on Friday, as Fairholme Funds said it had officially filed an appeal against a Sept. 30 decision that dismissed investors’ lawsuits regarding the government’s takeover of a majority of the agencies’ profits.

U.S. Federal Judge Royce Lamberth was responsible for the decision, which said that the government did not do anything illegal by consigning the profits.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) traded up 32 cents, or 8%, to $4.32, and Freddie’s fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) gained 70 cents, or 17.72%, to $4.65.

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