Morning Commentary: Preferred stocks open week higher; GSEs continue to trade actively but mixed

By Stephanie N. Rotondo

Seattle, Feb. 27 – Going into the final trading days of the month, the preferred stock market had a firm feel.

The Wells Fargo Hybrid and Preferred Securities index was up 17 basis points at mid-morning on Monday. The U.S. iShares Preferred Stock index was meantime up 19 bps.

Most of the liquidity remained focused in GSE-linked paper. However, the issues were diverging a bit in early dealings, as Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) dipped a nickel to $7.49 and Freddie Mac’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) rose 3 cents to $7.00 even.

The agencies’ preferreds have been on a mostly downhill slide since last week, when the U.S. Court of Appeals for the D.C. Circuit ruled against the plaintiffs in Perry Capital LLC v Mnuchin. The ruling claimed that the Recovery Act barred the plaintiffs from bringing certain cases against the government, though certain portions were remanded to the lower court.

Meanwhile, Morgan Stanley & Co. Inc.’s 5.85% series K fixed-to-floating rate noncumulative preferreds (NYSE: MSPrK) also continued to be more active than not, trading up 8 cents to $25.92.

On the down side, Deutsche Bank AG’s 7.6% trust preferred securities (NYSE: DTK) were a touch softer on reports the German bank had cut its executive bonus pool by about 80%, due in large part to ongoing – and mounting – legal costs.

The securities were down a penny at mid-morning, trading at $25.83.

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