Preferreds sees upward momentum; oil prices a drag on sector paper; Fannie, Freddie off

By Stephanie N. Rotondo

Seattle, Dec. 17 – There was “general strength back in the preferred market,” a trader said Thursday.

The preferred stock market got hammered on Monday, dropping 1.65%. Since then, the market has been clawing its way “almost back to where we were Friday,” the trader said.

The Wells Fargo Hybrid and Preferred Securities index closed 46 basis points higher.

News Wednesday that the Federal Reserve had opted to raise interest rates by 0.25% for the first time since 2006 did not appear to be an obstacle in trading, nor was ongoing commodity price declines.

“Even with oil being off, even [oil and gas-linked preferreds] are rebounding too,” the trader said early in the session.

However, he noted that on those issues “the markets are super wide though.”

While sector preferreds might have initially been trending higher, they came in by the bell.

For instance, Goodrich Petroleum Corp.’s 10% series C cumulative preferreds (NYSE: GDPPC) were up in early trading but closed down 24 cents, or 4.26%, at 53 cents. Legacy Reserves LP’s 8% series B fixed-to-floating rate cumulative redeemable preferred units (Nasdaq: LGCYO) meantime dipped 4 cents to $5.11.

Meanwhile, Fannie Mae and Freddie Mac preferreds continued to dominate trading. Early Thursday, the GSE paper was unchanged to slightly better, possibly indicating that a recent sell-off was coming to an end.

Those hopes were dashed by the end of the day, as the paper closed lower yet again.

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