Market digesting data, pace of rate hikes; GSE preferreds decline on Mnuchin comments

By Stephanie N. Rotondo

Seattle, Jan. 19 – Preferred stocks were selling off on Thursday as investors were keeping their eyes on a variety of headlines.

The Wells Fargo Hybrid and Preferred Securities index declined 84 basis points. The iShares U.S. Preferred index was meantime down 89 bps.

The confirmation hearing for Donald Trump’s Treasury Secretary pick, Steven Mnuchin, began in the early hours of the day. The market was interested in that outcome, especially as it pertains to GSEs and housing reform, a trader said.

During his testimony, Mnuchin indicated he was against any plan that involved recapitalizing and releasing Fannie Mae and Freddie Mac, driving down the preferreds.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) waned 2 cents to $8.14, while Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) dropped 19 cents, or 2.49%, to $7.45.

The market was also digesting fresh housing data that was “strong,” according to the trader, and an unemployment number that was the lowest seen in 43 years. The data appeared to back up Janet Yellen’s comments from Wednesday, in which the Federal Reserve chairman indicated that the time was ripe for continued gradual interest rate increases.

A market source also noted that concerns about inflation – which bumped up above 2% for the first time in several years – were driving the losses.

In other news, KeyCorp reported results that topped analysts’ expectations. However, given the overall tone of the market, the bank’s preferreds were in decline.

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