Preferred stock trading light as market dips on Treasury decline; RBS weak on breakup talk

By Stephanie N. Rotondo

Phoenix, July 5 - A "better than expected" jobs number caused treasuries to "take a dive," a preferred stock trader said Friday.

As such, preferreds were selling off, "but we've not given it all back."

With few people at their desks due to Thursday's Fourth of July holiday, the trader speculated that the dip "could be an overreaction." However, it could also be that preferred funds would start to see another round of outflows come Monday.

"Could be rough days ahead unless there is some geopolitical issue" that boosts Treasuries and, in turn, preferreds.

But while the market was trading off, there wasn't one credit or sector that was getting hit worse than others, the trader said.

"I think people are more concerned about yield" than any particular name, he said. "Of course, lower coupon issues are going to have bigger price swings."

The primary did see one new issue hitting the tape, a sale of $25-par senior unsecured notes due 2018 from MHI Hospitality LP. It was expected to be a small deal, as the company said it intended to sell at least $23 million of the notes.

Proceeds will be used to redeem all outstanding Sotherly Hotels Inc. preferreds.

Breakup looms for RBS

Royal Bank of Scotland Group plc's preferreds were among the day's most actively traded securities in an otherwise lackluster day.

The preferreds were softer following word that Moody's Investors Service is considering downgrading the Edinburgh, Scotland-based bank. The potential rating revision was based on uncertainty investors have as the U.K. government - which holds a majority stake in the company - has said it is considering breaking up the institution into a "good" and "bad" bank.

The 6.08% noncumulative guaranteed trust preferreds (NYSE: RBSPG) dropped 35 cents, or 1.41%, closing at $20.20, and the 7.25% series T noncumulative dollar preference shares (NYSE: RBSPT) declined 12 cents to $23.00.

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