Morning Commentary: Fannie, Freddie ‘jumping like crazy’ in morning trading; two new issues ahead

By Colin Hanner

Chicago, Feb. 6 – Government-sponsored enterprises Fannie Mae and Freddie Mac were “jumping” at mid-morning in the preferred stock market on Monday, a trader said, a continuation of the upward momentum that capped the end of last week, and two $1,000-par new issues are expected come to market.

The Wells Fargo Hybrid and Preferred Securities index was up 14 basis points, and the iShares U.S. Preferred Stock index mirrored the gains.

“All the Fannie and Freddie’s are jumping like crazy, and there’s no news out, but it must be because [Steve] Mnuchin is going to get voted in sometime soon and that things are going to change,” the trader said.

Though he has faced a contentious confirmation process, Mnuchin, president Donald Trump’s pick to lead the Treasury Department, was approved by Senate Republicans last Wednesday.

In the secondary market, Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up 41 cents, or 4.06%, to $10.50.

The 8.25% series T noncumulative preferreds (OTCBB: FNMAT) were up 50 cents, or 4.93%, to $10.65.

And, the 6.75% series Q noncumulative preferreds (OTCBB: FNMAI) were up 81 cents, or 9.16%, to $9.65.

Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) were up 36 cents, or 3.74%, to $9.99. Nearly 457,000 issues had been traded as of mid-morning, the most voluminous of the GSE’s issues.

As for new issues, a trader said First Republic Bank “is going to do a thousand-dollar par” deal, and financial services holding company, State Street Corp., will most likely bring a deal similar to the $1,000-par issue from last week, a trader said, referring to U.S. Bancorp’s deal priced on Feb. 2.

Moving in the opposite direction in the secondary market were Vanguard Natural Resources LLC’s 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP), which were down 34 cents, or 12.7%, to $2.40 off its bankruptcy announcement last week.

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