Preferreds pop as Fed changes policy language; energy names up; Fannie, Freddie active

By Stephanie N. Rotondo

Phoenix, Dec. 17 – Preferred stocks were rebounding early Wednesday as the market reacted to the Federal Reserve’s latest policy statement.

After its monthly two-day meeting, the central bank announced that it had changed language in regards to when it would raise rates. It switched “considerable time” to “patient,” leaving some to speculate that rates could rise sooner than expected.

In a press conference following the release, Janet Yellen, Fed chairman, said the language change was consistent with the previous policy and that there would likely be no overtures to increase rates for at least a few more meetings.

The Wells Fargo Hybrid and Preferred Securities index finished up 27 basis points. It was up 10 bps at mid-morning.

“It was doing pretty well,” a market source said of the preferred space.

On the heels of the Fed announcement, oil prices rallied, helping to push up some oil and gas names that had previously been on the decline.

Vanguard Natural Resources LLC’s 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) were up $1.20, or 7.13%, to $18.04. Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable preferred units (Nasdaq: BBEPP) meantime gained $1.42, or 7.18%, to close at $21.20.

Away from the energy space, a source said there was “a lot of activity in [Fannie Mae and Freddie Mac]” as Bill Ackman of Pershing Square Capital Management said he had “meaningfully” increased his bets in the government-sponsored entities.

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