Morning Commentary: Preferreds decline in post-FOMC session; Fannie, Freddie rise on memo leak

By Stephanie N. Rotondo

Phoenix, April 30 – The preferred stock market was weak in early trading as the month-end session got underway.

“The long bond continues to fall, and hybrids are all off about a quarter-point,” a trader said.

The Wells Fargo Hybrid and Preferred Securities index was down 13 basis points at mid-morning.

The preferred space started to come in on Wednesday as investors prepared for the latest policy statement from the Federal Reserve. Coming in the late afternoon, the central bank said it had chosen to remove any calendar date references from its policy on a potential interest rate hike, given that economic data was not as strong as it had hoped.

“[A rate hike in] June is definitely off the table,” a trader said. “September, or the fall, looks a little fuzzy.”

After ending the previous session with a negative tone, Fannie Mae and Freddie Mac preferred shares were popping early Thursday on word of a memo that was supposedly leaked from the Treasury Department. Some are pointing to the document as proof that the government was acting in bad faith when it placed the two GSEs into conservatorship in 2008.

However, there authenticity of the document has not yet been determined.

Still, investors were pushing the paper higher, as Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) put on 42 cents, or 8.77%, to $5.25. Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were meantime up 36 cents, or 7.44%, at $5.20.

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