Midday Commentary: Fannie, Freddie preferreds remain on upward course; Winthrop prices deal

By Stephanie N. Rotondo

Phoenix, Aug. 8 - Fannie Mae and Freddie Mac were on the move again Wednesday. The upward movement came on the heels of sizable profits from both government-backed mortgage buyers.

"They've doubled over the course of two days," a trader said. "There's big blocks that are flying around. All this stuff is back on the radar."

On Tuesday, Freddie reported a $3 billion profit for the second quarter. Fannie followed that up on Wednesday with a reported profit of $5.1 billion. The trader said that some investors were "betting on the lottery ticket" again, as there was renewed hope that the two companies could potentially be in a position to repay the government if the profits continue to churn out.

Freddie's 8.375% fixed-to-floating-rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were up 47 cents, or 20.17%, at midday at $2.80.

Fannie's 8.25% series S fixed-to-floating-rate noncumulative preferreds (OTCBB: FNMAS) meantime rose 40 cents, or 20%, by midafternoon trading to $2.40. The 8.25% series T noncumulative preferreds (OTCBB: FNMAT) rose 45 cents, or 20.45%, to $2.65.

But away from Fannie and Freddie, "the secondary is pretty quiet," a trader said.

Winthrop prices

In the primary, Winthrop Realty Trust priced $75 million of 7.75% senior notes due Aug. 15, 2022.

The $25-par notes came in line with talk and were upsized from $35 million.

A trader quoted the issue at $25.05 bid, $25.10 offered.

"It's doing well," the trader said, noting that retail interest, a "decent coupon" and the fact that Winthrop is "a name that people know" were helping fuel the fire.

The notes will be listed on the New York Stock Exchange. Settlement is expected no later than Aug. 15.

The joint bookrunners are Barclays, Stifel Nicolaus & Co. Inc. and Jefferies & Co. Inc. Credit Suisse Securities (USA) LLC is the lead manager, and KeyBanc Capital Markets and MLV & Co. LLC are the co-managers.

Winthrop is a Boston-based real estate investment trust.

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