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Morning Commentary: Fannie Mae, Freddie Mac jump on Mnuchin remarks; energy names lifted
By Stephanie N. Rotondo
Seattle, Nov. 30 – Preferred stocks were selling off in the final trading day of the month, though “not tremendously,” a trader said.
He called “everything down 15 cents to 30 cents on $25-pars,” which he added was about in line with where Treasuries were performing.
The Wells Fargo Hybrid and Preferred Securities index was down 66 basis points at mid-morning.
Bucking the early downward trend, Fannie Mae and Freddie Mac preferreds were “through the roof because of what Mnuchin said,” a trader remarked.
The trader was referring to Steven Mnuchin, the president-elect’s apparent pick for Treasury Secretary, who said that the GSEs should not be owned by the government.
“It was pretty clear,” the trader said of the comments.
The GSEs’ preferreds have been steadily climbing upward since the election of Donald Trump, on hopes that his administration would address GSE reform. Until Mnuchin’s comments, however, Trump’s campaign had not specifically addressed the matter.
In early midweek trading, the most active Fannie and Freddie securities were up 28% to over 30%, making the mortgage giants the day’s biggest percentage gainers.
Also gaining ground were oil and gas-linked preferreds, as OPEC agreed to limit production for the first time since 2008.
Domestic crude prices were up nearly 7.5% on the news.
Vanguard Natural Resources LLC’s 7.75% series C cumulative redeemable preferred units (Nasdaq: VNRCP) were up 30 cents, or 10.91%, at $3.05, while the 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) added 26 cents, or 8.78%, to $3.22.
Legacy Reserves LP was also higher, its 8% series A fixed-to-floating rate cumulative redeemable preferred units (Nasdaq: LGCYP) up 45 cents, or 6.48%, at $7.39 and its 8% series B fixed-to-floating rate cumulative redeemable preferred units (Nasdaq: LGCYO) up 19 cents, or 2.65%, at $7.36.
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