Weak jobs report, ‘problems in Spain’ pressure preferred stocks; New York Mortgage frees

By Stephanie N. Rotondo

Seattle, Oct. 6 – It was a “sea of red” in the preferred stock market on Friday, according to a market source.

Based on market indicators, the preferred space was fairly weaker in trading, due at least in part to a less-than-stellar U.S. jobs report.

“I think it’s all related,” a source said of the jobs report, adding that there are “possible problems in Spain” as well, given Catalonia’s recent referendum to break with the country and go independent.

“It all gave the market an excuse to soften,” he said. “Things are outrageously priced to begin with, the preponderance of risk is to the downside.

“And we haven’t seen a lot of volatility in our market since after the election.”

Both the Wells Fargo Hybrid and Preferred Securities index and the U.S. iShares Preferred Stock ETF ended down 44 basis points.

The Bureau of Labor Statistics said that 33,000 jobs were lost in September, though the unemployment rate fell to 4.2%, its lowest level since February 2001.

The market had been expecting the unemployment rate to hold steady at 4.4%, while nonfarm payrolls were expected to increase by 80,000.

The recent spat of hurricanes that have battered the southern portion of the country were partly blamed for the job losses.

As for the day’s goings-on, New York Mortgage Trust Inc.’s $125 million of 8% series D fixed-to-floating rate cumulative redeemable preferreds – a deal priced Thursday – freed to trade early Friday.

The issue was assigned a temporary ticker, “NYMMP.”

The preferreds easily dominated the day’s trading as well, with over 1.02 million shares being exchanged.

The paper closed at $24.84, up 19 cents.

The new issue came at the tight end of the 8% to 8.125% price talk. It was also increased from an expected $50 million.

Morgan Stanley & Co. LLC, UBS Securities LLC and Keefe Bruyette & Woods Inc. ran the books.

The dividend rate will be fixed until Oct. 15, 2027, at which point the rate will float at Libor plus 569.5 bps.

The New York-based real estate investment trust will use proceeds to acquire certain targeted assets and various other types of mortgage-related and financial assets that the company may target from time to time. The funds may also be used for general working capital purposes, including the repayment of debt.

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