Preferred stocks rebound after a week of declines; Fannie Mae, Freddie Mac reverse course

By Stephanie N. Rotondo

Seattle, Nov. 15 – The preferred stock market was rebounding on Tuesday after spending the last week in a downward spiral.

“The long bond is rebounding and preferreds are following right behind that,” a trader said.

However, he added that he was unsure whether or not the rally “has legs or not.”

“Obviously things are better,” another market source remarked. He added that the gains were “nothing fundamental.”

“Things are just so volatile,” he said. “And there is probably more volatility on the way. It’s just a question of where” things shake out.

The Wells Fargo Hybrid and Preferred Securities index rose 161 basis points, after being up 88 bps at mid-morning.

The index dropped 133 bps in the previous session.

Fannie Mae and Freddie Mac preferreds – which have been actively trading upward since Election Day – were “taking a breather,” according to a trader, as investors looked to take some of the recent profits.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS), for instance, declined 32 cents, or 5.8% to $5.20 in early trading. But the issue pared some of its losses, dipping just 2 cents to $5.50.

The 7.625% series R noncumulative preferreds (OTCBB: FNMAJ) were down 12 cents, or 2.4%, at $4.88.

As for Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ), they slipped 8 cents, or 1.54%, to $5.12.

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