Preferreds firm on limited holiday trading; recent issues trade up; Fannie, Freddie better

By Stephanie N. Rotondo

Seattle, May 27 – Preferred stocks ended the week with a firmer tone, even as liquidity was dampened due to the impending three-day Memorial Day weekend.

“I don’t think anything is going to happen today,” a trader said.

The trader further opined that even a speech from Janet Yellen, Federal Reserve chair, later in the day would not keep players around.

“By the time she’s speaking, half the people will already be driving out to the Hamptons or Michigan, or wherever you go,” he said. He added that he believed the talk would be a “non-event – unless she is incredibly hawkish.”

Yellen was scheduled for a sit-down with Harvard economics professor Greg Mankiw at 1:15 p.m. ET. Market watchers were hoping the Fed head will give further clues as to whether a rate hike is coming sooner than later – especially after the Commerce Department upwardly revised first-quarter GDP.

Last week, minutes from the last policy meeting of the central bank indicated that an interest rate increase is in the cards for June or July, assuming the economy continues to improve.

In her comments at Harvard, Yellen indicated that a rate increase is very much on the table.

The Wells Fargo Hybrid and Preferred Securities index improved by 10 basis points in the final trading session ahead of the holiday weekend.

As for preferred dealings, DTE Energy Co.’s $300 million offering of 5.375% $25-par 2016 series B junior subordinated debentures due 2076 were seen at $24.90 bid.

That issue came Monday via BofA Merrill Lynch, UBS Securities LLC and Wells Fargo Securities LLC.

From Tuesday’s business, Hersha Hospitality Trust’s $175 million of 6.5% series D cumulative redeemable preferreds were pegged at $24.80 bid early in the session.

The preferreds closed at $24.84 on Friday, up 9 cents.

A trader said the issue was trading under a temporary symbol, “HRHPP.”

Morgan Stanley & Co. LLC, BofA Merrill Lynch, Raymond James & Associates Inc., Wells Fargo and Citigroup Global Markets Inc. ran that deal.

Gabelli Utility Trust’s $50 million of 5.375% series C cumulative preferreds – a deal priced Wednesday – also had a temporary ticker, “GABUP,” according to the trader.

That issue was trading around par at mid-morning and pushed up to $25.05 by the close.

Morgan Stanley ran the books.

Fannie, Freddie remain strong

Fannie Mae and Freddie Mac preferreds were traded actively in an otherwise limited liquidity day.

Both names were trading up, as has been the trend over a week.

Fannie’s 8.25% series S fixed-to-floating-rate noncumulative preferreds (OTCBB: FNMAS) gained 13 cents, or 2.9%, to close at $4.61. Freddie’s 8.375% fixed-to-floating-rate noncumulative perpetual preferreds (OTCBB: FMCKJ) rose 6 cents, or 1.36%, to $4.46.

Since last week, the GSE preferreds have been climbing higher, as newly unsealed documents shed more light on the White House’s involvement with the Treasury Department’s decision to take a majority of the agencies’ profits. The documents also gave the creditors’ arguments – that the “net worth sweep” was unlawful and done to paralyze the two mortgage giants – more credibility.

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