Morning Commentary: Preferreds lose ground ahead of Fed meeting results; Freddie, Fannie decline

By Stephanie N. Rotondo

Seattle, May 2 – Preferred stocks were trending downward early Tuesday as the market prepared for results from the Federal Reserve’s latest policy meeting.

The meeting will go until Wednesday. It is largely expected that interest rates will hold steady, though there are some concerns that the central bank may opt to cut its forecast for the remainder of the year.

The Wells Fargo Hybrid and Preferred Securities index was off 1 basis point at mid-morning. The U.S. iShares Preferred Stock ETF was down 15 bps.

Freddie Mac reported earnings ahead of the session’s open, swinging to a profit from the previous year.

However, Freddie’s preferreds, as well as those of sector peer Fannie Mae, were waning in early dealings.

Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) were down 4 cents at $7.22. Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were off 9 cents, or 1.24%, at $7.55.

For its part, Fannie will report its first-quarter results on Friday.

Investors were also looking toward American Homes 4 Rent’s own earnings release, slated for Thursday.

The company’s $150 million of 5.875% series F cumulative redeemable preferreds (NYSE: AMHPrF) – a deal priced April 19 – were on the active side in early trading, slipping 4 cents to $25.75.

Meanwhile, NuStar Energy LP’s $350 million of 7.625% series B fixed-to-floating rate cumulative redeemable perpetual preferred units were on the rise, with one trader pegging the paper in a $25.32 to $25.42 context.

The deal came April 25 and is trading under a temporary ticker, “NUSRP.” The units are expected to list on the New York Stock Exchange on Wednesday under the symbol “NSPrB.”

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