Preferred market climbs to end week; Fannie Mae, Freddie Mac, Wells Fargo among busiest issues

By Christine Van Dusen and Stephanie N. Rotondo

Atlanta, March 21 - The preferred stock market on Friday finished up four cents, capping off a week that had investors keeping a close eye on the Federal Open Market Committee, which decided to taper its bond-buying program and begin raising interest rates soon after.

Against this backdrop, much of the week's trading activity focused on Fannie Mae and Freddie Mac.

Freddie's 8.375% fixed-to-floating-rate noncumulative perpetual preferreds (OTCBB: FMCKJ) dropped a nickel to $11.15 early in the week before moving to $11.20 in trading on Friday.

Fannie's 8.25% series S fixed-to-floating-rate noncumulative preferreds (OTCBB: FNMAS) lost a dime to close at $10.65 on Monday and traded at $10.50 on Friday.

Fannie's 8.25% series T noncumulative preferreds (OTCBB: FNMAT) also started strong only to come in by late morning on Monday. But that issue was holding steady most of the day and finished the session unchanged at $13.00. By Friday, the preferreds had dropped to $11.55.

A bipartisan group of senators has recently proposed legislation that would wind the two government-sponsored entities down over the course of the next five years. Once liquidated, a government bond insurance program would be implemented, but it would only kick in once private investors took sizable losses.

Though the proposal has some support in the Senate, it is not so loved in the House. In fact, Edwin Groshans, an analyst with Height Analytics, supposed in a research note on Monday that there was a less than 10% chance of the bill passing.

UBS active

In other trading at the end of the week, the floating-rate noncumulative trust preferred securities from UBS Preferred Funding Trust IV were trading at $17.25 on Friday morning, up 14 cents on 1.15 million in volume.

Old Second Capital Trust I's 7.8% cumulative trust preferred securities were spotted early Friday at $12.40, down 52 cents on 191,200 shares traded.

And RBS Capital Funding Trust VII's 6.08% noncumulative guaranteed trust preferred securities moved down 7 cents to $22.58 on just 188,589 in total volume

Later on Friday, Wells Fargo & Co.'s series N preferred stock traded at $21.40, up 5 cents on volume totaling 1.09 million, a market source said.

Digital Realty in focus

Digital Realty Trust's new issue of $300 million 7 3/8% series H cumulative redeemable preferreds closed at $24.75 on 1.2 million shares traded on Friday, a market source said.

The preferreds had traded in a $24.80 to $24.83 context on Thursday.

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

The company intends to contribute proceeds to its operating partnership, which will use the funds to repay borrowings under a global revolving credit facility, to acquire additional properties, for development opportunities and/or for general corporate purposes, including the potential repurchase or redemption of outstanding debt or preferred securities.

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