Preferreds decline in wake of election upset, but market seen ‘OK’ with the vote

By Stephanie N. Rotondo

Seattle, Nov. 9 – It was a “crazy morning” for the preferred stock market on Wednesday, a trader reported.

The trader noted that the “market seems to be OK” with the fact that Republican presidential candidate Donald Trump won the election on Tuesday, despite most polls showing Democratic candidate Hillary Clinton leading going into voting.

The trader noted that the long bond was weaker and that the Dow Jones industrial average was “bouncing back and fourth between positive and negative.” The Wells Fargo Hybrid and Preferred Securities index ended the day down 87 basis points. The index was down 69 bps at mid-morning, though it was down over 80 bps earlier in the session.

While there are a lot of unknowns about a Trump presidency, the market is speculating that his proposed corporate tax cuts would be good for issuers, making DRD-eligible issues cheap.

Chatter also has it that an interest rate increase from the Federal Reserve next month is still in the cards.

Trump has also said he would ebb the tide of regulations, which the market is “viewing as very strong for housing.” As such, Fannie Mae and Freddie Mac preferreds were getting a sizable bounce.

The trader also noted that there is some hope that Trump will look to recapitalize the agencies, instead of allowing the Treasury Department to commandeer most of the GSEs’ profits. Doing so would take most, if not all, of the risk associated with the mortgage giants off of the taxpayer’s back.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were initially up 95 cents, or 22.89%, at $5.10. The preferreds settled a little lower than that, however, adding 54 cents, or 13.01%, to $4.69.

Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) were up 70 cents, or 17.07%, at $4.80 in morning trading. By the bell, the issue was seen up 40 cents, or 9.76%, at $4.50.

Hersha lists on NYSE

Hersha Hospitality Trust’s $100 million of 6.5% series E cumulative redeemable preferred stock began trading on the New York Stock Exchange on Wednesday under the ticker “HTPE.”

At day’s end, the issue was seen at $24.50, which compared to opening levels of $24.75.

At mid-morning, a trader quoted the preferreds at $24.65 bid, $24.69 offered.

The deal came Nov. 1, upsized from $75 million. Price talk was 6.5% to 6.625%.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, Wells Fargo Securities LLC and Citigroup Global Markets Inc. were the joint bookrunners.

The Philadelphia-based real estate investment trust will contribute all proceeds to its operating partnership. The partnership will then use the funds for general corporate purposes, including future acquisitions.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.