Morning Commentary: Preferred stock investors eye upcoming data; Freddie posts quarterly loss

By Stephanie N. Rotondo

Seattle, Nov. 3 – A preferred stock trader said Tuesday’s session was starting out “sleepy” as investors were keeping their “eye on the prize.”

Later this week, the trader said, a fresh initial jobless claims number is expected, as well as nonfarm payrolls. How those figures look will determine “whether the Fed will have a reason to raise rates in December,” the trader said.

“If the numbers are strong, we will probably see a 20-basis-point sell-off,” the trader added. If the numbers are weaker than expected, “things will grind a little tighter.”

As for the new issue pipeline, the space continued to be radio silent. The trader noted that with Veterans Day next Wednesday, issuers will “basically have one week to get a deal done and then it is Thanksgiving and November is over.”

In the secondary, Freddie Mac reported its first quarterly loss in four years on Tuesday, prompting some to call for federal housing reform sooner than later, according to a trader. The loss means the Treasury has no profits to sweep up either, he said.

“But no one is going to do anything going into elections,” the trader opined.

On the news, GSE preferreds were trading flat to lower at mid-morning.

Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were off 7 cents, or 1.41%, at $4.90. Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were also at $4.90, which was unchanged.

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