Morning Commentary: BofI launches $25-par notes; existing market subdued; Fannie, Freddie edge up

By Rebecca Melvin

New York, Feb. 25 – The preferred stock market was sizing up a new entrant early Thursday after BofI Holding Inc. filed a prospectus to offer $25-par 10-year subordinated notes.

The Bank of the Internet represents a new name for the preferred market, a market source said. And he expected to see the new notes price later Thursday or on Friday.

Otherwise the preferred market was subdued, with recent new issues little changed to slightly higher.

There were some comments made by BofA Merrill Lynch on Fannie Mae and Freddie Mac that had some of the Fannie and Freddie preferreds trading better by 20 cents to 30 cents, the market source said.

A BofA rates strategist published a note on Wednesday that suggested the government conservatorships that went into effect in 2008 following the housing crisis may be a step closer to ending after the agencies’ lack of capital cushion was flagged by the Federal Housing Finance Agency last week.

Overall, however, “there was not too much happening” in the preferred market, the market source said.

The recently priced Goldman Sachs Group Inc. 6.3% series N noncumulative perpetual preferreds were moving up to trade around $25.22.

The new W.R. Berkley Corp. $100 million of 5.9% $25-par subordinated debentures due 2056 traded at $24.70, which was a little higher. And eBay Inc.’s $750 million issue of 6% $25-par notes due Feb. 1, 2056 were at $24.80, which was unchanged on the day.

But the eBay paper was expected to move up. “They should slowly tick up from here. It’s a unique security that probably will be put in the S&P index,” a market source said.

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