GSEs trade off as preferred space ticks up; Global Indemnity up slightly; AmTrust gains

By Colin Hanner

Chicago, March 23 – The preferred stock market ticked slightly higher on Thursday, a market source said, with issues of government-sponsored enterprises Fannie Mae and Freddie Mac taking the bulk of the attention on the session.

The Wells Fargo Hybrid and Preferred Securities index was up 24 basis points – up 15 bps from mid-morning – while the U.S. iShares Preferred Stock ETF was up 27 bps, an 11 bps gain from the morning.

A market source said that the market index was reflective of the increased liquidity the market had seen on the day.

In recent issues, Global Indemnity Ltd.’s $120 million of 7.875% $25-par subordinated notes due 2047 were off 3 cents to $24.82, which were “reflective of most of the day,” a market source said. He added that there were 182,000 shares traded.

“The primary market is basically nonexistent,” this week, a market source said.

The main story continued in the selloff of GSEs on Thursday amid speculation further compacted on Wednesday by a Reuters story that reported a legislative overhaul of Fannie and Freddie was “highly unlikely.” This comes during a period where the market continues to debate the possibility of privatization heralded by Treasury secretary Steve Mnuchin last year.

“There are still supporters [of privatizing Fannie and Freddie]. You’re rolling the dice” – by still considering the possibility of legislative change soon – “and that’s your best bet,” a market source said.

Uncertainty about the future of health care in the United States – and the sentiment around an administration’s ability to put policy into law – was also put on hold on Thursday, as leaders from the House delayed a vote originally scheduled to occur on Thursday, which could have implications for the market outside of the health care sector.

In the secondary market, Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were down 11 cents, or 1.60%, to $6.75.

And Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) were down 36 cents, or 5.40%, to $6.31.

Elsewhere in the space, GMAC Capital Trust I’s 8.125% series 2 fixed-to-floating rate trust preferreds (NYSE: ALLYPrA) were off 1 cent, or 0.04%, to $25.35, one of the most active shares of the day.

AmTrust Financial Services Inc.’s 7.75% series E noncumulative depository preferreds (NYSE: AFSIPrE) were up 68 cents, or 3.11%, to $22.58.

And AmTrust’s 6.95% series F noncumulative depository preferreds (NYSE: AFSIPrF) were up 59 cents, or 2.59%, to $20.62.

A trader said he was looking at the preferred issuances of AmTrust closely following its admittance of accounting issues with its 10-K filing in late February.

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