Fannie Mae, Freddie Mac preferreds trade actively; Atlas, Public Storage holding steady

By Stephanie N. Rotondo

Phoenix, March 14 - Fannie Mae and Freddie Mac preferred stock continued to dominate Friday trading, a trader reported.

As was the case early Thursday, the agencies' preferreds were rebounding some after getting hammered most of the week. However, the shares closed Thursday's session weaker again.

Come Friday, though, the preferreds managed to hang onto their gains.

Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were up 57 cents, or 5.36%, to $11.20. Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up 45 cents, or 4.37%, at $10.75.

The agencies' preferreds initially turned upward on Tuesday following word that a bipartisan Senate group was putting forward a plan to wind down the agencies.

However, as the news was digested, the "market finally got their cup of wake up coffee," a market source said, and the preferreds began to get hit.

The source said there was "high, high volume" in the agencies' preferred shares, which ended the session down 7% to 8.5% on average.

"The rhetoric with [the new proposed legislation] is that there is more bipartisan support [than the previous plans put forth]," the source said. He said that support increased the probability that the plan could get approved, though he would not go so far as to say it was "probable."

Though investors are obviously concerned that they will reap nothing from their investment, there could still be hope. In a letter to Jacob Lew, Treasury Secretary, senator Pat Toomey, a Republican from Pennsylvania and a member of the Senate Banking Committee, said he thought investors should not be shut out.

"While I strongly support GSE reform that protects taxpayers, such efforts should also be mindful of investors in addition to other considerations," Toomey wrote to Lew. "Taxpayers should be fully compensated, but once they are, investors, such as the York County pension fund in Pennsylvania, should not be denied their fair share of any remaining value."

The preferreds were then rebounding in early Thursday trading but gave back those gains to end weaker once again.

There was more turmoil for Fannie and Freddie preferreds on Thursday, as one U.S. senator said the fate of shareholders rested with the courts.

No new deals

Away from the GSE preferreds, a trader said that action was limited, noting that there was "nothing new in the pipeline."

From the latest week's deals, Atlas Pipeline Partners LP's $110 million of class E cumulative redeemable perpetual preferred stock units were pegged at $24.55 bid, $24.60 offered and Public Storage Inc.'s $225 million of 6.375% series Y cumulative preferreds were pegged at $24.82 bid, $24.85 offered.

"They've been there all week it seems like," a trader said.

Atlas priced on Wednesday, and Public Storage came on Monday.

The Wells Fargo Hybrid and Preferred Securities index was trading off 9 basis points as of mid-morning. It moved up to end 20 bps firmer on the day.

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