Morning Commentary: Weak jobs number weighs on market; interest rate increase outlook pushed back

By Stephanie N. Rotondo

Phoenix, Oct. 2 – The preferred stock market was pressured early Friday along with the broader markets amid a jobs number that was weaker than expected.

The Wells Fargo Hybrid and Preferred Securities index was off 21 basis points at mid-morning.

The September jobs report showed the private sector adding just 142,000 jobs during the month, well below the expected addition of 203,000 jobs. Additionally, figures for August and July were downwardly revised.

Given the lower-than-anticipated numbers, a trader said that there was a “consensus” among traders that the Federal Reserve would not raise interest rates until 2016.

“If that’s the case, people should roll in [to the preferred market],” the trader said. “Our stuff is still cheap compared to corporates and Treasuries.”

However, he noted that it could take some time for buyers to jump in, as “retail investors are still scratching their heads and wondering why they had such a bad quarter.” That combined with hefty ETF outflows is what is keeping investors at bay, he said.

As for the week’s new issues, the Southern Co.’s $875 million of 6.25% $25-par series 2015A junior subordinated notes due 2075 were seen trading at $24.75 bid, $24.77 offered early in the session.

The deal priced Thursday, coming massively upsized from $250 million and at the tight end of 6.25% to 6.375% price talk.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, UBS Securities LLC and Wells Fargo Securities LLC led the deal.

TravelCenters of America LLC’s $100 million of 8% $25-par senior notes due 2030 – a deal priced Wednesday – was meantime pegged at $24.60 bid, $24.65 offered.

A trader said the notes freed to trade early Friday, though another market source had reported the deal freed up Thursday afternoon.

Citigroup Global Markets Inc., Morgan Stanley, RBC Capital Markets LLC and UBS Securities ran the books.

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