Preferred stock market finishes firm; Freddie, Fannie weaken; recent issues remain active

By Stephanie N. Rotondo

Seattle, May 2 – Preferred stocks were trending downward early Tuesday but recovered later in the day as the market prepared for results from the Federal Reserve’s latest policy meeting.

The meeting will go until Wednesday. It is largely expected that interest rates will hold steady, though there are some concerns that the central bank may opt to cut its forecast for the remainder of the year.

The Wells Fargo Hybrid and Preferred Securities index ended the day 22 basis points better, though it was off 1 bp at mid-morning. The U.S. iShares Preferred Stock ETF rose 8 bps, after being down 15 bps earlier in the day.

Freddie Mac reported earnings ahead of the session’s open, swinging to a profit from the previous year.

However, Freddie’s preferreds, as well as those of sector peer Fannie Mae, traded lower.

One market source opined that it was statements made by Treasury secretary Steve Mnuchin that were to blame for the weakness.

Meanwhile, recently priced issues continued to be active.

Qwest Corp.’s 6.75% $25-par notes due 2057 (NYSE: CTDD) were the top trader of the day, even beating out the GSE preferreds.

The notes rose 7 cents to $25.07, moving over the par threshold for the first time since listing.

Wells Fargo & Co.’s 5.625% series Y class A noncumulative preferreds (NYSE: WFCPrY) were also eyed. Like Qwest, they moved up, adding 9 cents to trade at $25.08.

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