Morning Commentary: Preferred market rises following ‘decent’ bank earnings; Fannie, Freddie gain

By Stephanie N. Rotondo

Phoenix, Oct. 14 – As global economic indicators continued to worry investors, preferred stocks were moving higher Tuesday, spurred by the kick-off of bank earnings.

“JPMorgan, Citigroup and Wells Fargo all reported earnings that were decent,” a trader said, noting that JPMorgan “missed [expectations] a little.”

Most of the banks’ preferreds were on the rise in early trading.

Freddie Mac and Fannie Mae paper was also “bouncing” yet again, continuing a trend from Friday when Fairhome Funds said it was appealing a federal judge’s ruling that dismissed lawsuits alleging the government’s takeover of profits was illegal.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up 33 cents, or 7.76%, at mid-morning, trading at $4.58. Freddie’s fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) had put on a quarter, or 5.4%, to $4.80.

Not all sectors were benefitting from the day’s positive tone, however.

A trader noted that maritime and energy names were taking a beating.

Paragon Shipping Inc.’s 8.375% $25-par senior notes due 2021, for instance, were trading off 44 cents, or 2.51%, to $17.06 early Tuesday.

The $25 million issue priced Aug. 5 at par.

The primary space meantime remained quiet, even with the firmer tone and the “decent” bank earnings.

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