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Morning Commentary: Preferred stocks attempt to rebound; Fannie, Freddie preferreds mixed
By Stephanie N. Rotondo
Phoenix, May 1 – Preferred stocks were looking to regain some ground in early Friday trading after trading off for most of the week.
The Wells Fargo Hybrid and Preferred Securities index was up 5 basis points at mid-morning.
The week overall has been a bit muted, a trader noted, even as the long bond declined and Morgan Stanley & Co. Inc. surprised the market by announcing a redemption of its trust preferreds.
The primary space has especially been quiet. However, a trader said that he has heard of at least one deal that is planned for early next week.
In secondary dealings, Fannie Mae and Freddie Mac preferreds continued to see some action following the release of disappointing stress test results on Thursday.
Early Thursday, the preferreds had begun to move up after a supposed memo from the Treasury Department was leaked. The memo was interpreted by some to indicate that the government acted in bad faith when it placed the GSEs under its care in 2008.
Later in the session, the stress test results came out, showing that the agencies could require up to about $160 billion in the event of a severe economic downturn. The preferreds started to come in on that news, though they still ended firm.
In early Friday trading, the preferreds were mixed.
Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up 3 cents at mid-morning, trading at $5.03. The 6.75% series Q noncumulative preferreds (OTCBB: FNMAI) were up 42 cents, or 9.59%, at $4.80.
Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were meantime steady at $5.00 per share.
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