Morning Commentary: Preferreds come in after jobs report; rate increase eyed; Fannie drifts lower

By Stephanie N. Rotondo

Seattle, Jan. 6 – The preferred stock market was “bouncing around with the jobs numbers,” a trader said Friday.

The latest Labor Department report showed nonfarm payrolls rising by 156,000 in December, which was less than the 175,000 expected. The report also indicated that unemployment ticked up to 4.7% from 4.6%.

However, there were positive signs as well. November’s figures were upwardly revised to 204,000 jobs added during the month. Wages were also showing signs of growth, increasing 0.4% month over month and 2.9% from the previous year.

The yearly gain was the fastest improvement seen since June 2009.

A trader said that the data was leading market players to speculate that the Federal Reserve’s next interest rate increase could come in June.

The Wells Fargo Hybrid and Preferred Securities index was down 9 basis points at mid-morning.

Meanwhile, the primary space remained silent Friday, but there was buzz that the pipeline could start flowing next week.

“I’m hearing a possible [business development company] next week,” a trader said. “And possibly another non-rated deal.”

Next week is also the kick-off to bank earnings season, which could jumpstart the new issue market.

In early secondary dealings, Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were coming off of Thursday’s highs, slipping 3 cents to $7.97.

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