Source: 'euro uncertainty' could cause volatility in bank preferreds; Allianz active, down

By Stephanie N. Rotondo

Portland, Ore., July 8 - A weak jobs report pressured the overall market Friday, but traders were surprised that the preferred stock arena held in as well as it did.

"I was surprised we didn't see more of a pull back on the jobs numbers," a trader said, referring to new job data for June, which showed only 18,000 jobs being added and the jobless rate climbing to 9.2%. It was the third consecutive monthly increase.

"Preferred margins really held in there," another trader said, adding that there was "no aggressive selling."

Still, it was "a very, very quiet day for a very quiet week," the trader said. "It's just one of those days."

The trader was optimistic that the new issue market might see a new deal next week.

"That would wake everybody up," he said.

There were also two announcements out of Europe Friday that continued to generate what one market source called "euro uncertainty." The announcements had to do with the upcoming release of European bank stress test results as well as the European Commission's plan to announce its proposal to implement Basel III regulations. As such, the source speculated that the next few weeks could be volatile for European banks such as Royal Bank of Scotland Group plc.

Allianz SE's unlisted preferreds were one of the day's top trading names, though a source said he did not know what was driving the action. The preferreds closed weaker.

Volatility predicted

The European Banking Authority announced Friday that it will release the results of its second round of stress tests on July 15.

"That creates the possibility for a lot of volatility in the next week," a market source said. "There is a huge opportunity for rumors."

The European Union meantime announced that it will release its proposals to implement tougher Basel III regulations for the banks in its regions.

"That probably doesn't get enacted until next year," the source said. Still, he added that the lead-up to both events, as well as the aftershock, could mean that European banks will be "pretty volatile" for the next few weeks.

Royal Bank of Scotland might be one to watch, as the name has already been pretty volatile. The Edinburgh-based bank's series G and E paper continued to be active during Friday trading.

"There was still a lot of activity in RBS," the source said.

The Gs (NYSE: RBSPG) closed 7 cents lighter at $14.02, with about 440,000 preferreds trading. The Es (NYSE: RBSPE) dropped 8 cents to $14.02 on volume of 388,500 preferreds.

Allianz active, softer

German insurer Allianz saw its unlisted "AZM" preferreds trade in huge size, with about 1.9 million preferreds changing hands, a source said.

He said the securities lost 15 cents, to close at $26.40.

Also trading in good size were Citigroup Inc.'s $100-par tangible dividend series H preferreds (NYSE: CPH). They fell $1.27 to $120.33 on volume of about 758,500 preferreds.

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